BUSINSS MANAGEMENT TARGET DATE DONE ON
STRATEGIC MANAGEMENT AND PLANNING
1 Objectives of organisation
2 Strategy Formulation
3 Planning & Control
4 Strategic management ; the traditional approch
5 Other models of strg manag
6 SWOT & GAP analysis
7 Performance appraisal & analysis
8 Missions Goals & Objectives
9 Mergers & Acquisitions
10 Corporate Reorganisation
Strategic Management n Planning from ATFL
Strategic Management n Planning from ACCA
Case Studies
CORPORATE SOCIAL RESPONSIBILITY &BUSINESS ETHICS
11 Ethics & Social responsibility
12 Corporate Governance
HUMAN RESOURCE MANAGEMENT
13 Human Resources
14 Individuals
15 Training & Development
16 Appraisal & Career Management
17 Management & Human resource
18 Groups in Organisations
19 Strategy for Critical periods
20 Introducing Change
ATFL Same Topic
ACCA Same Topic
Case Studies
MANAGEMENT OF THE WORKING ENVIRONMENT
21 The changing environment
22 The Global Competitive env
MARKETING MANAGEMENT
23 Evolution of Marketing Concept
24 Strategic marketing and planning
25 Maketing Research
26 Product
27 Price
28 Place
29 Promotion
ATFL Same Topic
ACCA Same Topic
Case Studies
INTERNATIONAL BUSINESS
30 Globalisation
31 Global Strategy
32 Appraisal of overseas investment decision
33 Raising Capital overseas
34 Financial control within Multinatonals
35 Management of International Trade
ATFL Same Topic
ACCA Same Topic
Case Studies
CHAPTER # 1OBJECTIVES OF ORGANISATION
KEY TERMS
StrategyA Course of action, Including the Specification of Resources required, to achieve a Specific objective
Stgy is a pattern of activities that seek to achieve the objectives of the org , & adopt its scope , resources & operations to env changes in the long run
Strategic Financial ManagementIdentification of possible strategies Capable of maximising an Org's Net Present Value
the allocation of Scarce Capital Resources among Competing Oppertunities &
the implementation & monitoring of the chosen strategy so as to achieve stated Obj
Financial ManagementIt is the management of fins of business i.e Fin Planning n Controll to achieve Fin Objs of Bus
Ecology is the realtion of plants n other living creatures to each other
Stake holders invest in the effectiveness of a particular management team
REFERENCESJhonson & Scholes Characteristics of Strategic DecisionsCyret & March Concensus TheoryGranger 3 types of business objectivesArgenti Various Objectives of BusMendelew Stake holders mapping
SUMMARY
Characteristics of Strategic Decisions by J & S Objectives Of BusinessConcerned with 3 types of business objectives Granger
Scope of org's activities Mission
Matching org activities with SWOT Corporate Objective
Allocation / Reallocation of Resources Unit Objective
Affect Long term n Operational decisions
Affected by Env , Resourse capability , Values Various Objectives of Bus Argenti
& expectations of management Creation of Customers
Have implications of change throughout the org Servicing society
Complex in nature Providing Employment
Maximising Profit
Levels of StrategyCorporate As per Argenti Obj Must be Expressed as Follows
Business/Competitive Identify the Beneficieries
Operational State Nature of Objective
State the Size of Benefit
Determinants of StrategyStakeholders n Internal Coalitions Primary n Secondary Objs
Stake hold MendlewLevel of interest Hierarchy of ObjectivesLevel of power Primary Corp objs
General n Economic Influences Secondary objs
External influences
Nature of Business Trade off Between Objectives
Org culture Profitability not the best measure of objs
Economic Objectives Short term n Long Term Objs
Social Responsibilities Multiple finanacial Objs
CONSENSUS THEORY: Cyret & March Financial Objectives
Managers run a business but do not own it & that Main obj is to maximise wealth
Organisations don’t have objectives only ppl have Fin targets
Objectives emerge as a Consencus of differing Non Fin Objs
stakeholders views n r not entirely contoled by managers
Relationship between Fin n Non Fin Objs Concept of Business Green approach, Env Concerns etc
Stake holders view
Management view Envirinmental AccountingEco Balance, Cleaner Technology, Corporate Libs,
Financial management Decisions Perf Appraisal, Life cycle Assessment, Budgets etc
Investment Decisions
Take over, Merger, Divestment etc Objectives of Publically owned n Non Commercial CosManager has to Primary obj ------- not the maximisation of wealth
Identify oppertunity but to contribute to national economy
Evalute it External financing limits
Decide on optimum allocation of funds Financial manageent 4 such groups is different coz
Financial Decisions they dont have competitors
Long term ( Cap structure ) dont operate 4 profit
Short term ( Working cap ) decisons taken by polititions or civil serventsDividend Decisions
CHAPTER # 2STRATEGY FORMULATION
KEY TERMS
Long Term Strategic PlanningFormulation , Evaluation n Selection of Strategies for preparing a Long Term Plan of action to attain Objs
Planning HorizonIt is the furtherest time ahead 4 which plans can be Quantified
Strategic Planning -- AnthonyIt is the process of deciding-- on the objs of the org ,on changes in these objs, & on resources used toachieve these objective and the policies that are to govern these objs ( their acquisition , use n disposition)
Tactical or Management ControlIt is the process by which managers assure that resources are obtained n used -- Effectively n Efficientlyin the accomplishment of the orgs objs
Operational Control ControlIt is the process to ensure that Specific tasks are carried out -- Effectively n Efficiently
ExpansionIt is the Growth of Existing Products and/or Development of Exiating Markets
REFERENCESDrucker 3 aspects of Strategic PlanningAnthony Definition of Strategic Planning
SUMMARY
Business Planning Growth Strategies
Managers performance usually measured in short term Integration or Related Diversification
Fin Plan should : Horizontal Integration
Have Quantified Targets new markets existing product
Cover 3-5 or 10 years new product existing market
Be a part of Strategic Plan Vertical Integration
Advantages Farward Vertical integ
Identification of fin reqs Backward Vertical integ
Prospective use of surplus cash
Plans 4 raising required funds Diversification or Unrelated Diversification
Future profitability of comp Concentric Diversification
Optimum utilization of resources New product with similar technology
Set stds 4 measuring perf or market etc
Bottom up Approach Conglomerate Diversification
Top Bottom Apoproach New product for new customers
Long Term Strategic Planning Withdrawl or Abandonment
Drucker describes 3 aspects of Strategic planning
making risky decisions with future considerations Merger & Acquisitions
organsing systematic efforts to carryout these decis Organic growth vs acquisition
Measuring results of these decisions
Pricing
Rational Model Short term pricing
Covered with chp 4 Competitive bidding
Strategic pricing
Strategic Fund managementStrategic Cash flow Planning Regulatory Frame work of Accounting
Simillar to cash budgeting except:
longer planning horizons
Uncertain future cashflows Financial Controls
Emergeny plans Levels of Planning
Consistent with other policies Strategic Strategic vs Tactical
Effect of new investments Tactical Tactical vs Operational
Cash Rich Comps Operational
Risk Management
Working cap management
Selling off nonessential assets
Changing dividend policy
CHAPTER # 3PLANNING & CONTROL
KEY TERMSPlanning
It involves making choices between alternatives & is primarily a decision making activity
ControlIt involves measuring & Correcting actual performance to ensure that the alternatives
that are chosen & the plans for implementing them are carried out
Feed BackThe term can b used to describe both "the Process of reporting back control information to mngand the control information itself
Budget CenterEach section of an org 4 which a budget is prepared
Responsibility AccountingIt is a system of accounting that segregates Revenue and costs into areas of personal responsibility in order to Monitor n Assess the perf of each part of org
Responsibility CentreIt is a unit of an org , headed by a manager , who has direct resp for its performance
Controllable CostsThe items of Expenditure which can be directly influenced by a senior manager within a given span of time
Competitive AdvantageC Adv is a profitable n sustainable position that exists in the minds of Consumers who believe that the valuethey receive from a product/service is greater than both the price they pay n value being offered by competetors
REFERENCESPorter & Miller Implications of IT on CompetitionPorter 5 factor modelPorter 3 Generic Strategy to Achieve C Adv
SUMMARY
Planning & Control Cycle Controllability & Responsibility ReportingPlanning Steps in deciding a budget centre
Identify objectives What shd b the B Centre?
Identify potential strategies What inc , exp &/or Cap employment plans
Evaluate strategies should each Budget centre prepare?
Choose Alternative Course of Action Criteria for measuring performance
Implement Long Term Plan
Control Features of a well organised Sys Of Controls
Measure actual resultrs A hierarchy of Budget Centers
Compare them with plan Clerly identified Resps for achiving targets
Respond to Divergence from plan Resps for Rev, Cost n Cap employed
Actions taken on the basis of findings Controllable n Non Controllable Costs
Control action Controllability of fixed costs
identify n correct the problem Controllability n Apportioned Costs
No Action Controllability n Dual Responsibility
when things are goin well Control Reporting
Alter the Plan Budgetary Planning n Control Systems
if results are not good n mng Gen Obj is to ensure Communication ,
can do nothing about it Coordination n Control in an org
Feed Back Using IT As Strategic ToolSingle Loop Feedback As per Porter n Miller IT can change the nature
Relatively small variations of Competition in an Industry in 3 ways
No change in existing plans Change the Industry Structure
Associated with budgetary controls Porters iderntified 5 competitive forces
& Std Costing working in competitive env
Double Loop Feed Back Threat of new entrants
Higher level Feed back Bargaining power of suppliers
Ensures that plans, budgets, org structure Bargaining power of Customers
& control sys are changed to met the Threat of Substitues
changes in conditions Rivalry
Negative Vs Positive Feed Back IT as collaborative Venture
Feed Forward Control Electronic data InterchangeValue Added Networks
Risk n Uncertainity Creating New Business
Types of Risks
Accounting 4 Risks Be used to create Competitive Advantage
Quantifying the Risk Porters 3 Generic Strategy to Achieve C Adv
Decision Rules Cost Leadership
Decision Trees Differentiation
Managers n Stake holders Approach to risk Focus
CHAPTER # 4
STRATEGIC MANAGEMENT - TRADITIONAL APPROACH
KEY TERMSStrategy - Jhonson n Scholes
The direction n Scope of an org over the Long Term which achieves advantage 4 the org
through its configuration of resources within a changing env to meet the needs of market
and to fulfil share holders expectations
TacticsThe deployment of Resources to execute an agreed strategy
PloicyA general statement providing guidelines for management of Decision Making
Strategic ManagementThe Development, Implementation & Control of agreed stgs There is more to stgy than merely deciding what u want to achieve and how u r 2 achieve it
Corporate Strategy - Jhonson n ScholesIt is concerned with what types of business the org is in. denoting the most gen level of stg in org
Business StrategyHow an org approaches a particular product market area
SUMMARY
Strategic Mng Involves Rational ModelAnalysis Strategic Analysis
Choice Internal Appraisal
Implementation Missions n Objectives
Control Environmental Analysis
SWOT
Defining Aspects of St Mng Match Position audit with Environmental objs
Scope of activities Strategic Choice
Env Strategic option generation
Resources Evaluate options
Values Strategy selectionTime Scale Implimentation
Complexity Emboding The chosen strategy in corp plan
Strategies at Corp Business Unit LevelsOperationsMarketingR & DHRMIT / ISFinance
CHAPTER # 5OTHER MODELS OF STRATEGIC MANAGEMENT
KEY TERMSCompetitive Strategy Porter
A Competitive Strategy is the taking of Offensive or Defensive Actions to create a Defendable position
within an industry ----&---- a super return on investment
The Learning Org
An org skilled at Creating , Acquiring & Transfering Knowledge & at modifying its behaviour to reflect
new knowlegde n insight
REFERENCES
Andrews Patterns n Competences
Mintzberg Emergent Strategies
Johnson n Scholes Stgy n Managerial Intent
Herbert Simon Bounded Rationality
Incrementalism Lindblom
Kenichi Ohmae Strategic Thinking
Hofer n schendal Environmental Fit
Hamel n Prahalad Future Orientation
Ohmae CompetitionPorter Competitive Strategy
SUMMARY
Andrews Environmental Fit Hofer n schendal
Stgys are Patterns of Mng Decisions Stgy a mediating force btw org n env
Stgy is exploitation of Competences Strategic Logic
A proposed sequence of action must
Emergent Strategies Mintzberg b consistent with orgs objs n env
Task of Strategic mng is to shape n
control these strgys as they develop Future Orientation Hamel n Prahalad
Implicit or Explicit Stgys 2 suggestions
8 Styles of Stg Mng Future is not some thing that just
5 Ps ( ways in which term stgy is used happens to org
Plan, Ploy, Pattern, position, Perspective Orgs can create their future
Crafting Emergent Stgy A Diagonostic to indicate how future
Oriented a firm is
Stgy n Managerial Intent Johnson n ScholesThe Command View Competition Ohmae
Paradigm n Politics A good bus stg is 1 by which a firm can
Issue Awareness gain significant ground on its competitors
Issue Formulation at an acceptable cost
Solution Development Method:
Solution Selection Readjust current resources
Relative superiority
Bounded Rationality Herbert Simon Challenge Assumptions
Managers work till they find a Degrees of Freedom
tolerably satisfactory alternative Interplay of 3 Cs (Stgc Triangle)
Customer Comp n Competition
Incrementalism Lindblom
Small scale adjustments to past practices Competitive Strategy Porter
Creating a sustainable stgc position
Logical Incrementalism 3 Assumptions of Ohmae n Porter
Broad outlines of stgy are developed by
an indepth review , with a scope for day Learning Based strategyto day incremental decision making Knowledge as resource
Knowledger Creation
Strategic Thinking Kenichi Ohmae The learning org
Stgy is essentially a creative process Implications for stgy
It Operates as follows
Ask the right question
Observe the problem
Group Problems together
Patterns n Competences
CHAPTER # 6SWOT & GAP ANALYSIS
KEY TERMS
Corporate AppraisalA critical assessment of the Strengths & Weaknesses, Oppertunities & Threats (SWOT Analysis) in realation to the Internal & Environmental factors affecting an entitry in order to establish its condition prior to preparation of long term plan.
Crucial Success Factorsare those factors that are fundamental to Strategic Success
Jhonson n Scholes defines them as "those components of a strategy in which the org must exel to out perform competition
Gap AnalysisA comparison btw an entitys ultimate objective & expected performance of projecs-- both planned n undergoing
Forecastingis the identification of factors & quantification of their effect on an entity as a basis 4 planning
Projectionis an expected future trend pattern obtained by extrapolation
it is primarily concerned with quntitative factors while forecast includes judgement
Extrapolationis a technique of determining a projection by Statistical means
Scenariois an internally consistent view of what future might turn out to be
REFERENCES
Jhonson n Scholes Criticle success factorArgentiMercer Steps in Scenario Planning
SUMMARY
Strengths & Weaknesses Flexibility-- Strength or Weakness
Apraisal identifies the following
Shortcomings in present skills and resources SWOT n Criticle success factor
Strengths the comp seeks to exploit
Areas to look at include Analysing the planning gap
Marketing
Products n brands
Distribution 4 stages defined by Argenti
R & D
Finance Errors in Forecast
Personnel
Plant n Equipment Profit Gap
stocks
Role of Mng Accountant Other forms of Gap analysis
Cost effective programe
Product analysis Continuous Gap Analysis
Product attitude survey
Areas of Finance where weekness might exist
Oppertunities in areas of Product Profitability Scenario Planning
Macro Scenarios
Oppertunities n Threats Building Scenarios
What Oppertunities &/or Thrests exist? Steps in Scenario Planning by Mercer
Competitors response to oppertunities Industry Scenarios
Cos competitive advantage in opertunity Using scenarios 4 formulating stgs
How the thrests will affect mrkt
Combining The Elements of SWOT Analysis
Where strength matches opper - exploit position
For weakness n threats - Corrective / Contingency plan
Cruciform Chart
F0 Forecast
F0 Forecast
CHAPTER # 7PERFORMANCE APPRAISAL & ANALYSIS
KEY TERMS
Contribution MarginThe difference between the sales volume & variable costs of those sales
Capital ProjectsThese involve any long term commitments of funds undertaken now in anticipation of a potential inflow of funds at sometime in future
ROIProfit before int n tax * 100 / oprations mng cap employed
A form of return on cap employed, which compares income with the operational assets used to generate that income
Return on cap employedProfit before int n tax * 100 / avg cap employed
it indicates the productivity of cap employed
Residual IncomeIt is a measure of the centres' profits after deducting a Notional or Imputed Interest Cost
BenchmarkingThe establishment through data gathering, of targets & comparators, through whose use relative levels of performance(and particularly areas of under performance ) can be identified.
SUMMARY
Survival n Growth Benchmarking
Covered in chp 1 n 2 Types of b marking
Internal
Comparing Profit centre performance Functional
Covered in chp 3 Competitive
Strategic
Contribution as Measure of Performance Stages of Benchmarking
Contribution n Strategic Decisions B m Exercise as part of strategic Review
Entering the Market J & Scholes - Questions 2 b asked
Breakeven Alanysis Questions to b asked while selecting appropriate BM Basis
Questions to b asked Levels of BM
Exit Resources
Using NPVs to control Strategic Inv Competences in Separate Activities
Discounted cash flows Competences In Linked Activities
Advantages & Disadvantages of BM
Devisional performance through ROI & RI
Reasons 4 makin ROI a Perf Indicator Inflation
Financial Reporting For Performance measurement decide
Aggregation Consequences of Inflation
5 consequences of historical cost accounting which
Different measurement basis reduce the reliability of A/Cs due to price inflation
Net Assets Fixed asset values & depreciation
Gross Assets Cost of Sales (high stocks)
Replacement Assets Borrowing benefits
Ratio analysis
Comparison Of Accounting Figures Increase in working capital needed to
Ratio Analysis Ratio Analysis between results of support normal trading operations
current year with last year
other comps in same industry
other comps in opther industries
CHAPTER # 8MISSIONS GOALS & OBJECTIVES
KEY TERMS
Strategic Intent Its simillar to Vision but it should have an emotional core
Mission - Mintzberg Mission describes the orgs basic function in the society, in terms of products n services it produce
Mission Statement These are the formal statements of an orgs mission n may b reproduced on various places
Goals the intentions behind decisions or actions, the state of mind that derives individuals or
collecives of individuals called org to do what they do
Goal Congruence the state which leads the idvs to take actio which are in their self interest and also in the
best interest of the entity
Culture The sum total of Beliefs , Knowledge, Attitudes of mind & Customs to which ppl are exposed in their social conditioning
Beliefs are what we feel to be the case on the basis of objective & subjective information
Values are beliefs which are relatively enduring, realtively general & fairly widely accepted accepted ways of behaving in response to a given situation
Customs are modes of behaviour , representing culturally accepted ways of behaving in response to given situation
Artrfacts are physical tools, designed by men, for their physical n psychological well being
Rituals a type of activity, taking a symbolic meaning, it consists of fixed sequence of behaviour repeated over time
Org Culture it consists of Beliefs, Attitudes, Practices n Customs to which ppl are exposed during their interaction with org
REFERENCEST.R Schein 3 levels of culture in orgPeters n waterman Mackinsey 7-S ModelJhonson n Scholes The Cultural WebMiles & Snow Culture The Env & Strategy
SUMMARY
Vision n Strategic Intent Goals n Objectives Mackinsey 7-S Model Peters n waterman
what the bus in now? Goal Congruence Hard Elements
what it would b ideally? Types of Goals Structure, Strategy Systems
what the ideal world b like? Ideological Goals Soft Elements
Formal Goals Shared values, Staff, Style, Skills
Functions of strategic intent Shared Personal Goals Organisational Ice Berg French n Bell
System Goals Formal Aspects
Mission Commercial goals n objs Overt-- like Hard Elements
Elements of Mission Dealing Conflict between Goals Informal Aspects
Purpose rational evaluation Covert - Like Soft Elements
Strategy Bargaining Cultural web Jhonson n Scholes
Strategic Scope Compromise Culture n Structure Roger Harrison
Politics n Std of Behaviour Sequential attention Zeus These interelated 4 different stds
Values n Culture Set Priorities Apollo The indv
Stake holder Mapping Athena type of work the org does
Importance of Mission covered in chp 1 Dionysus culture of org
environment
Mission Statements The Role Of Culture Culture The Env & Strategy Miles & Snow
Characteristics adv of understanding culture Miles & Snow
Brevity Organisational Culture Defenders
Flexibility 3 levels of culture in org Prospctors
Distictiveness Basic underlying assumps Analysers
Overt Beliefs Reactors
Mission n Planning Visible Artifacts Denisons Model
Factors affecting org culture Consistency Culture
Functios of mission Cultural characteristics of Dynamic Comps Mission Culture
Culture n Risk Involvement CultureAdaptability Culture
CHAPTER # 9MERGERS & ACQUISITIONS
KEY TERMS
Take OverPurchase of a comp of the controlling interest in the voteing sh cap of another comp
Mergeris a Bus Combination that results in the creation of a new reporting entity , formed from the combining parties
in which the share holders of the combining parties come together in a partnership for the mutual sharing
of the risks n benefits of the combined entity
& in which no party to the comb in-substance obtains control over any other, or is otherwise seem 2 b dominant
whether any virtue of the proportion of its shareholders rightsin the combined entity, the influence of dirs or other wise
Boot StrappingThe process of buying a comp with a higher EPS in order to bost up ur own EPS
ConsortiaOrgs co-operate on specific business prospects. ???????????
Joint VenturesTwo or more orgs setup a third org
It is an arrangement where two firms (or more) join forces for manufacturing, financial & marketing purposes and each has
a share in both equity n management of the business
Liscensing AgreementsIt is a Commercial contract whereby the liscencer gives something of value to the liscensee in exchange for
certain performances n payments
Franchising is a method of expandng the bus with less capital than would otherwise be possible
REFERENCES
P.F. Drucker Rules 4 Post Acq Integration
C S Jones 5 Step integration sequence
SUMMARY
Take Overs
Rasons or Advantages of Merger/ Take overs Post Acquisition integration
Strategic Approach to Take over Rules 4 Post Acq Integration P.F. Drucker
Other Factors in Takeover Decision
Resistance from Target comp 5 Step integration sequence C S Jones
Contesting an offer
Cost of Take over bids Managing Employees
Payment Methods
Cash Merging Systems
Share Exchange
Covertable loan Stock Failures of Mergers n Take Overs
Mezzanine finance
Earn out arrangements Joint Ventures , Alliances & Franchising
Boot Strapping AdvantagesConsideration of price earning ratio DisadvantagesAccepting a dilution in eps Characteristics of Liscence agreement
Reverse Acquisition Characteristics of Franchising
Monoply Authority
CHAPTER # 10CORPORATE REORGANISATION
KEY TERMS
DivestmentsA divestment is a proportional or complete reduction in ownership stake of an org.
DemergersSplitting up of a corporate body into two or more separate n independent bodies
Sell-OffsA form of divestment involving the sale of a part of a comp to third party, usually another comp
LiquidationsIt may b due to bakruptacy or Voluntary Dissolution n involves closure of whole business , selling of all the asssets
and distributing net funds raised among shareholders in the proportion of their share holding
Spin OffsA new comp is created whose shares are owned by the shareholders of the org comp which is making the distribution of assets
MBOsIt is the purchase of all or part of business from its owners by its managers
MBIsWhen a team of outside managers as opposed to managers already running the bus mount a takeover bid and then run the bus
SUMMARY
Reasons For Divestments etc MBOs
To concentrate on a particular part of bus Questions in Evaluating a MBO
Selling a loss makin unit Mng has full range of skills?
Selling an attractive part of bus to save the rest Why is the comp 4 sale?
Liquidity problems Projected profits n Cashflows?
Sellling a subsidary with high risks What is being bought?
Selling a subsidiary at profits Price ?
Selling a subs that is a peripheral 4 group Funds availablility?
Exit Routes?
MBOs
For Mng -- method of setting up a new bus Problems
For Owners -- method of divestment Little experience of fin mang
Tax n other legal complications
Parties To MBOs Changing the attitude of employees
Management team Deciding the bid price
Directors of Group Cash 4 maintainance of fixed assets
Financial Backers Changes in HR
Ralations with suppliers / customers
Possible Reasons
Best offer may b from mng MBIsSale can b arranged quicklyGroup can still maintain relations Capital Reorganisation
N Other factors mentioned above
Going Private
Exit Strategies for Venture Capitalists From public to private comp
Sale of shares to st exchg Advantages
Sale of comp to another firm Cost saving
Selling the shares to comp itself Limited number of members
Simillar objs of share holders
Success Factors of MBOs Sh holders are close to mng
Favourable buy out price Disadvantages
Personal motivation n determination No trading of shares on st exch
Quicker decision making n more flexibility Lose of reepute
Savings in over heads
CHAPTER # 11ETHICS & SOCIAL RESPONSIBILITY
KEY TERMS
EthicsA set of moral principles to guide behaviour
Compliance Based Approach To Ethics
Ensures that the comp acts within the letter of law & that violations are
Prevented, Detected & Punished
Integrity Based ApproachCombines a concern for law with an emphasis on managerial responsibility
for ethical behaviour. It treats ethics as an issue of org culture & incorporates
ethics into corp culture n sys
Whistle Blowingis the disclosure by an employee of Illegal, Immoral or Illegitimate practices
on the part of org
SUMMARYBoundary Management
Many comps share the same aspirations
Levels of bus objectives Ansoff
Social n Ethical Environment
Environment
Political , Social , Legal
Ethical problems facing Managers
Examples od Social n Ethical Objectives
Social responsibility of org n managers
Social resp is expected from all type of orgs
Arguments against Charity etc
Arguments in Favour of Charity etc
Ethics in Organisations
Personal Ethics
Professional Ethics
Org Cultures
Org Systems
Leadership Practices & Ethics
Creative
Protective
Integrative
Adaptive
Compliance Based Approach To Ethics
Integrity Based Approach
Tasks of Ethics Management
CHAPTER # 12CORPORATE GOVERNANCE
KEY TERMS
Agency Theoryproposes that , although indv members of the team act in their own self interest , the well being of each indv depends on
the well being of other team members n on the performance of the team as compared to other teams
Agency CostDifference between the return expected if managers truly maximised shareholders wealth
and the actual return , given that managers will actually be seeking to maximise their own wealth
Goal Congruence
is the accordance between the objectives of agents acting witin an org
and the objectives of the org as a whole
Corporate Governance
Cadbury report defines corp governance as "The sys by which comps are Directed & Controlled"
SUMMARYPatterns Of Share Ownership Code Of Corporate Governance
Public Comps Directors
owned by shareholders Introduction of non executive directors
managed by managers Qualification n eligibility to act as director
ease of selling shares Tenure of Office of Dirs
Private Companies 3 years casual vac to b filled in 30days
Owner Managed Responsibilities Powers & Functions of BODs
Cant sell shares Shd b exercised with a sense of Objective Judgemnet
& independence in the best interests of listed comps
Institutional Investors Statement of ethics n bus practices
They channel funds invested by idvs Vision n Mission Statement
Advantages Internal Controls
Disadvantages Powers to b exercised by Passing Resolution
Meetings of BOD
Advantages of Knowing who major share holders are atleast once every quarter
……………………………….
Potential Sources of Conflict Orientation Cources
AGENCY THEORY CFO & Company Secretary
Theory Appointment & Approval
Behavioural AssuBehavioural Assumptions Qualification
Structural Assumptions Requirements to attend board meeings
Criticism Corporate & Financial Reporting Framework
Agency Cost Directors report to share holders
Bonding & Monitoring Procedures Frequency of Fin Reporting
Responsibility of Fin Reportin n Corp Compliance
Goal Congruence Disclosure of interest by a Dir Holding Comps Shares
Procedures Divestment of Shares by sponsers / controlling int
Profit related pay Audit Committee
management audit procedures Composition
Frequency of Meetings
Information Sensitivity & Disclosure & Confidentiality Attendance
Terms of Reference
Reporting Procedures
Internal Audit
External Auditors
Compliance with code of corp governance
CHAPTER # 13HUMAN RESOURCES
KEY TERMS
HRM Is concerned with ppl at work n their relationships as they arise in the working env
The real requirement is proactive and constructive rather than Defesive n Reactive
to discharge their true role , personnel managers must anticipate the needs of the org in the short n the long term
They must develop policies to produce solutions to anticipated problems resulting from ext / internal env,
whilst influencing n creating the attitudes amongst employees needed 4 the enterprises' Survival n Success
HR Planning Concerns the Acquisition , Utilization , Improvement n Return of an enterprises' HRs
HR planning deals with Recruitment , Retention , Down sizing , Training n Retrainingto enhance skill base
SUMMARYObjectives of HRM The HR Plan
Organisation Requirements Strategic AnalysisCooperative Relationships The environment (PEST)Responsive to change Man power (SWOT)
Social n Legal Responsibility HR utilization
Objectives
Adnatages Time scales
Lncreased productivity
Increased group learning Forecasting
Low Staff Turnover Estimating Demand
increased Initiative Estimating SupplyHR as a sourse of competitive advamtage Current workers
Labour Market Research
Views of HRM position surveyThe old "odd job view" Closing the gap btw dd n supply
According to Drucker Making subsidery plans to implement HR plans
"The personnel manager saw his role aspartly a file clerk's job Job Analysis
partly a house keeping job Investigating tasks performed in each job partly a Social worker's job Identifying the skills required
and partly "fire fighting " to head off
union trouble or to settle it" Relevent conceptsJob description
HRM - Changing Trends Job title , Reporting to , Subordinats
Real req is proactive.... Overall purpose , Accountability , Flexibility
Job Specification
Roles of HRM Job Design 4 major roles suggested by Tyson Person Specification
To represent the orgs central value sys Assessing patterns of personality
To maintain the boundaries of the org Desirable qualities in managers
To provide continuity n stability to orgTo asdopt the org to change Implementation
Two optionsExistence of a seperate HRM department depends on : Training Existing staff ( discussed in net chps )
Size of the org Recruiting new staffActivities of the org Advertising
SelectionRole of HRM department Applications n CVs
Organisation Sift through ApplicationsOrganisation Design InterviewsOrganisation Development Testing
Manpower Weightage of BiodataPlanning Group selection methodsRecruitment ReferencesEmployment NotifyingTraining Preparing Employment ContractsPerformance review Induction trainingManagement Development On day one
Motivation Post employment trainingJob designRemuneration Copeing with Culture Shortage Or Surplus of HRs
employ commitment is supposed to replace Internal transfers Restricting Recruitmenttechniques of control imposed by management Promotions Pert time working
Employee Relations External recruitments RedundanciesDealin with trade unions Reducing Turn over Cuting wastage of resourcesConsultation n participation Overtime
Employee Services TrainingHealth n safetyIndv employee welfare Control over Human ResourcesPersonnel records Gap analysis etc
CHAPTER # 14INDIVIDUALS
KEY TERMS
PersonalityThe total pattern of characteristic ways of "thinking, Feeling & Behaving "
that constitutes the indvs' distinctive method of relating to the env
AttitudeAttitude is the position that an ind has adopted in response to a theory or belief ,
an object, event or other person. It is a subjective concept rather than Objective
Orgs usually have generalised assumptions as to type of employees they would wish to employee
and to whome they would wish to allocate various tasks n responsibilities
In unfavourable markets a happy work force may not make an org profitable
but they ll necessarily be more productive
Content Theories
assume that human beings have a package of Motives which they pursue
ie they have a set of needs or desired outcomes
Process Theories
explore the process through which outcomes become desirble and are pursuaded by individuals.
this approach assumes that a man is able to select his goals n choose the paths towards them ,
by a consious or unconsious process of calculation
Motivators
produces satisfaction when present n capable of motivating the individuals eg Achievement , Growth
Status , Advancement , Gaining Recognition , Being given Responsibility Challenging work etc
Hygiene Factors
or maintenance factors -- these could not give satisfaction or motivation when present but there absence
however causes dissatisfaction. Eg Comp policies , Salary , Job Security ,Workin conditions etc
The need to avoid the unpleasantness is satisfied at work by hygiene factors
The need 4 personal growth is satisfied by motivator factors n not by hygine factors
Expectancy Theory
The strength of an indvs' motivation to do something ll depend on the extent to which he expects
the results of his efforts if successfully achieved , too contribute towards his personal needs or goals
The strength of an individuals motivation is a product of 2 factors
The strength of his preference 4 a certain outcome - Valence
The individuals expectation that the outcome ll result from a certain behaviour
( subjective probability)
CHAPTER # 14INDIVIDUALS
SUMMARYPerformance n Productivity Motivation
Variables Affecting Performance Content TheoriesIndividual Variables Maslow's Hierarchy of Needs
Education Self actualisation ( fufilment of personal potential)
Experiance Esteem Needs ( independence , status , respect )
Intelligence / Apptitudes Love / social Needs ( relationships, affection )
Motivation / Interests Safety Needs ( security , peace , order )
Personality Characteristics Physiological needs ( food , shelter )
Personal Circumstances
Organisation n Social Variables Plus 2 higher order needs
Socaial Env Freedom of inquiry n expressionTypes of incentives Need 4 knowledge n understandingType of training n Supervision
Situational Variables ERGCharacter of Org The need 4 existence
Phy environmemt The need to relate to others
Pyhsical n job Variables The need 4 personal growth
Work space n arrangements also called "Existence- relatedness- growth"
Design n Condition of Working EnvMethods of Work Herzberg - Two - Factor Content Theory
Managers attitude n org Culture He distinguished between hygiene facors n
motivating factors based on what he saw as 2Individuals separate "need systems" of individuals
Personality
Individual Development Process Theories
Characteristics as indvs mature Expectancy Theory
Organisations interest in Personal Development M = V x EFrustration , Conflict , Feelin of Failure "M" is the strength of motivation to do sth
Low Prospects etc causes High labour "V" is 4 Valence ir strength of his preference
Turnover , Absentecism , n Preoccupation for a ertain outcome
with financial reward that is Self Destructive "E" is Expectation that bahaviour will result
for the org in desired outcomePorter n Lawler
Personality Differences n Work Behaviour Equity TheoryExtroverts Goal Setting TheoryNeurotics / Introverts
Psychological contractsType of Behaviour Coercive
Authoritarianism CalculativeNeed 4 Achivement CooperativeSelf Esteem
Attitudes Pay n Job SatisfactionDepends on Difficulties associated with insentive plans
Perception Assessment of satisfaction n MoralePersonal Experiance Alleviating dissatisfaction n low morale
Positive attitude leads to ...Indirect influences on Attitude
CHAPTER # 15TRAINING & DEVELOPMENT
KEY TERMSResourcing an Organisation
is about building n maintaining the "skillls n knowledge base" of the org
Human Resource Development (HRD)The process of extending personal abilities n qualities by means of "Education, Training n Other Learning experiences"
Developmentis the " growth or realisation of a person's ability n potential through the prov of learning n educational experience "
Trainingis the " planned n systematic modification of behaviour through learning events, programmes n instruction which enable indvs to achieve the level of knowledge, skill n competence to carry out their work effectivly"
Learning OrganisationAn organisation that facilitates the learning of all its members n continuously transforms itself
Personal Development Planis a clear development action plan for an individual which incorporates a wide set of developmental oppertunities including formal training
Skillswhat the indv needs to b able to do if results are to b achieved. Skills are built up progressively by repeated training.
Validation of TrainingObserving the results of the course and measuring whether the training objectives have been achieved
Evaluation of Training
Comparing the actual costs of the scheme against the assesed benefits which are being obtained
If the costs exceed the benefits, the scheme ll need to b redesigned or withdrawn
SUMMARY
Purpose of HRD Investors in ppl Training Methods
To meet req level of perf Aspects On the Job
Continuous improvement in per Planning Instruction
Maximising ppls potential 4 growth Regular review Job rotation
Development activities Action Develop the perception
Training Evaluation Assistant to position
Career planning Training Process in Outline Committees
Job rotation Identify org's training needs Projects
Appraisal Define learning requirements Action Learning
Other learninig oppertunities Define training objectives Formal - Course Training Methods
Training n Development Stgy Plan training Programes Lectures
Based on overall stgy of firm Implement training Discussions
Identify skills req Evaluation case study
Draw Formal development stgy Feedback Exercise
Implementation Training Needs Analysis Role Play
Qualities of Good Training Training surveys Computer based training
Relevence Bus strgy
Problem based Appraisal / performance reviews Course may b
Action oriented Attitude Surveys Internal courses
Performance Related Evaluation of existing programes Day release
Benefits of HRD to Org Job analysis Distant learning
Lower learning cost Training Gap Revision Courses
Avoid accedients is the gap btw Block release
Low supervision needs Current Status Sandwitch Course
Flexibility Skill base
Source of motivation Indv Performance Learning Styles
Delegation of speacialised skills Org's current results Theorists
Copeing with new advancements Desired State Reflectors
Corporate Culture Knowledge n Skills needed Activists
Training Does not Covers required Std Pragmatists
Poor job design, equipment etc Desired results / stds Learning Cycle
Bad management Programing objectives Concrete experience
Bad work env Moving from current - desired Observation n reflection
Personal handicaps Personal Development Plan Formin abstract concepts n
Motivation Purpose generalisations
Poor recruitment Stages Applying / testing the implications
Advantages to Individuals Analyse current position of new concepts in new situations
Increases Portfolio of skills Personal SWOT analysis Evaluating Training
Psychological benefits Liking of skills Validation of training
Social benefits Performance Evaluation of training
Better perormance on the job Set goals Methods
The Laerning Organisation Draw action plan Tests
Characteristics Programing Objectives Direct questioning
Role of Training Behaviour Effect of training
Enables skills 2 b diseminated Standard Difference in corp obj
oppertunity 4 ppl to work together Environmental Trainees reaction to experience
( all objs shd b SMART ) Change in job behaviour
Impact on organisation's goals
CHAPTER # 16APPRAISAL & CAREER MANAGEMENT
KEY TERMSAppraisal
is the systematic review n assessment of an employee's performance, potential n development needs.
Educationis that process that results in formal qualifications up to n including post graduation degrees
Trainingis the formal learning activities which may not lead to qualifications, n which may b received at any time in a working career
Developmentis a broader term including " job experience n learning from other managers, particularly one's immidiate superior"
Managing CareersA technique whereby the progress of indvs within an org from job to job is planned with organisational needs and indv capacity in mind
Management developmentProcess of improving the effectiveness of an indv mnager by developing the necessary skills n understanding of org goals
Effective appraisal depends on integrity n ability n efforts of indv managerAssessment must b related to an established std inorder for comparisons to b made btw individualsAppraisal reflects the values an org seeks to promoteA correct appraisal with correct implementation of action plan onfluence success of org
SUMMARY
Purpose of Appraisal Problems with Appraisal
Systematic n planned review of Confrontation
Performance ( behaviour of person ) Biased report
Potential (capacity of person) Perf levels not being standerdised
Training Needs Subjective feedback
Identifies indvs having potential 4 growth Feed back based on recent perf only
Determines key areas of improvement Disagreement on long term prospects
Manpower planning One sided process
Increases Communication Appraisal as chat
Monitoring org's selection procedures Appraisl as Bureaucracy
Need For Appraisal Appraisal as unfinished business
Compel to analyse performance Different ppl having different criterias
Justifies the judgements Assessor possesses some desired traits
Give feed back to appraisee Limiting the expression to checklist
Process Of Appraisal Managers may not have time to observe
Identify criteria 4 assessment Indvs perf may b affected by others
Assessment report by manger Appraisl is often defesive ( interplay of emotions
Assessment interviews playing with someones carear etc )
Review by assessors supervisor Org culture may not take appraisal seriously
Prepare n implement Action plan Appraisal n Pay
Follow up Problems in giving performance based reward
Approches 4 Assessment Interview Lack of funds
Tell n Sell method Some firms have to "run to stand still"
Tell n Listen Method Small cash pay increases in low inflation economy
Problem solving approach Comparison btw indvs is hard
Folowup Procedures Pay is given 4 future not past
Discuss results with appraisee New Approches to appraisal
Carryout proposed action (promotion / training) Upward appraisal
Monitor the perf Customer appraisal
Get feedback n make necessary changes Degree Appraisal
Points to b Considered Managing Careers
Org plan n problems Advantages
Personal characteristics Indv n Org Issues
System problems Model A
Relevence Model B
Fairness Future / Long Term Planning For C Mng
Serious intent Education Training n Development
Cooperation
Efficiency Dev
Techiniques of appraisal Tr
Overall assessment Edu
Guided assessment
Grading system Management development
Target oriented methods Necessary Skills
Behavioural Incedent Methods General skills
Result oriented schemes Ability to motivate n organise others
What Is Appraised Goal matching of department
Key performance issues relate to job discription Coordination of dep
Personality is not relevent unless directly related Understanding other dep's goals
Competence Techniques
Ability to transfer skills Formal education n training
Self Appraisal Group learning
Saves time n cost Confrences / Seminars
Increases responsibility n motivation Counselling with seniors
May reconcile goals of indvs n org on the job learning
But ppl are not often the best judge of themselves Transition from Functional to General Management
Effectiveness of Appraisal Roles Funct Mng Gen mng
Depends on Orientation Task oriented Goal oriented
The effort put in by mangers Role Organiser Facilitator of res
Integrity of managers Goals Short term long term
Ability to write
Observation of manger
CHAPTER # 17MANAGEMENT & THE HUMAN RESOURCE
KEY TERMSTwo imp variables in managerial effectiveness are style and a capacity to motivate subordinatesA managers style is the way in which the manager handles his or her relationship with the task n with subordinatesThis is sometimes referred to as leadership which is the process of influencing others to work willingly and to the best of their capabilities
Responsibility Is the lib of a person to discharge duties. The concept of responsibility is associated with AccountabilityManagers are accountable to their supervisors as to how well they have delegated their duty
Organisational AuthorityThe scope n amount of discretion given to a person to make decisions, by virte of the position he or she holds in the org
Delegation Of AuthorityAssignment of authority to subordinates with with the discretion to make decisions within a certain sphere of influence
Power is distict from authority but is often related to it. Whereas authority is the right to do something, power is the ability to do it
Influence The process by which a person in an org changes the attitude of another through eg Force, rules, Persuation, Bargaining n NegotiationAuthority n power in an org defines two things
The part that each person is expected to performThe relationship btw members
So a manager delegates authority to his subordinates which creates responsibility while the subordinate in responce is accountable to his manager
n the manger is accountable to his superior
Discipline Discipline promotes good order n behaviour in an org by enforcing acceptable stds of conduct.
It can be enforced by sanctions, encouraged by example or created by indv's own sense of what is fitting n proper
Incompetence employees best efforts have not reached the stds required
Misconduct Delebrately not doin the best
SUMMARY
Management / Leadership Theories Power at Different Levels
Trait Theories Senior mng
Certain traits makes a person good leader Middle mng
Style Theories int groups
Heckman Dept powers
Dictatorial Discipline
Autocratic
Democratic Disciplinary Problems
Laisez Faire Absenticism
Ashridge Management College Poor perf
Tells Bad attitude
Sells Breach of safety rules
Consults Refusal to carry out instructions
Joins Disciplinary Actions
Rensis Likert ( Style n Effectiveness ) Reprimand
Four main elements in Effective managers Informal talks
High performance Writtem warnings
Employee centered Demotion
Give independnce to subordinates Discharge
Participative Trust Disciplinary lay offs / Suspension
Blake's Grid Causes of dismissal
X axis - Concern 4 production Unfair Dismissals
Y axis - Concern 4 people Redundancies
Points
Impoverished Health n Safety at work
Country club Physical n Psychological Health
Task Management Importance of health n safety in org
Middle road Causes of Accidents in relation to work place
Team Duties of Employer
J Adair's Duties of Employees
Create balance btw Systematic approach towards health n safety
Task needs
Group needs Discremination N Equal Oppertunity
Indv Needs Special entitlement in case of Maternity
Power Ways of Discremination
Types of power Direct
Physical power Indirect
Resource power Position (Quota schemes etc)
Negative power Equal oppertunity employers
Position / Legislative power
Expert power National Legislations
Personal power
CHAPTER # 18GROUPS IN ORGANISATION
KEY TERMS
GroupIs any collection of ppl who perceive themselves to b a groupA primary working group is the immediate social env of the indv worker
TeamIs a small number of ppl with complementary skills who are committed tp a common purpose, performance goals n approach for which they hold themselves basically accountable
Team WorkingTeam working allows work to b shared among a number of idvs , so it gets done faster without ppl losing sight of their whole tasks orhaving to coordinate their efforts through lengthy channels of communication
SUMMARY
Creating Effective Teams Political Behaviour
Groups Aspects of organisational politics
Common sense of identity n belonging Mintzberg - Various Political games
Loyalty to the group Games to ...........
Purpose n leadership Resist authority
Teams Counter this resistance
Aspects of team Build power bases
Work organisation Defeat rivals
Control Change the org
Knowledge generation Political Activities can occuer in Following ways
Decision making Structural Changes
Multi disciplinary Teams Interdepartmental Coordination
Multiskilled Teams management Succession
Development of Teams Allocation of Resources
Forming Political Tactics
storming Increase the power base
Norming Build Coalitions
performing Expand networks
Ideal team Characteristics Constrain the decision
Problems with teams Withhold inf
Creating an Effective team Present inf in a distorted manner
Givens Reimpose sales procedures etc
Intervening Factors By pass formal channels of communication
Outcome Managerial Response To Conflict
The value of groups as work units Initial Mng Response May Be
Limitations of Teams Denial
Group Norms Suppression
Dominance
Conflicts in Organisations Compromise
The Happy Family View Integration / Collaboration
The Conflict View Conflict may b Reduced by
The Evolutionary View Structural seperations
Constructive n Destructive Conflict Bureaucratic authority
Charles Handy - Differences appear in 3 ways Limited Communication
Arguments Cooperative Behaviour Might b Encourged by
Competition Integration devices
Conflict Confrontation / Negotiation
Conflict in Groups n deparments Consultants
Ways in which groups behave Job rotation
Group cohesion , competition n conflict Super oriented goals
Conflicts Intergroup training
Between groups Conflict Btw Mng N Organised Lab Unions
Withing Groups More problamatic
Between competing groups Needs collective bargaining
Win / Loose situation Joint mng union committees
chrs of winning group
chrs of loosing group
Cohesion n group thinking
Group subcultures n conflicts
Causes n Tactics of Conflict btw deps
Operative goal incompatibility
Differenciation
Task interdependence
Scarcity of resources
Power distribution
Uncertainity
Removal sys
CHAPTER # 19STRATEGIES FOR CRITICAL PERIODS
SUMMARY
Mainitaining Changes in Times of Change Models of Growth n Development
Organisational Change Criterias 4 Measuring growth
Change within Reasons 4 Growth
Chg dueto external Pressures Greiners Model
PEST Phase Crises of Growth Through
Customers 1 Leadership Creativity
Competitors etc 2 Autonomy Direction
Nature of Change 3 Control Delegation
Products Produced 4 Red Tape coordination
Services Provided 5 ? Collaborations
Methods Of Production X axies - Age of org ( young - mature )
Style Of Leadership Y axies - Size of org (large - small)
Working Conditions Criticism
Personnel Policies Logical Incrementalism
Org Structures / Size Issues of Size
Organisation Life Cycle Large orgs
Sigmoid curve Small Orgs
Birth Contraction & Decline
Growth Causes
Maturity Environmental Entrophy
Decline Vulnerability
Organisational Atrophy
4 Stages in Crises
Blinded Stage
Inaction / Hidden Crises
Faulty action / Disintegration
Crises & Collapse or Dissolution
Remidies
Feed back failure
Turn Round
Recovery policy
Contraction
reinvestment
Rebuilding
Structural Reorganisation n Redevelopment
CHAPTER # 20INTRODUCING CHANGE
KEY TERMS
Learning also involves relearning / not merely learning new things but trying to unlearn what is already known
"Behavioural Diagonosis" analyse the disturbances caused to cultures n power structures in each unit
Force Field AnalysisIt is based on interplay of Restraining n Driving forces that keeps things in equilibriumSo it maps the forces that are pushing towards the preferred state n the restraining forceswhich are pushing back to current state
Organisation development MethodsSet of techniques intended to improve effectiveness by improving the relationships btw ppl in org
SUMMARY
Methods of Change Possible reactions to change
Steps involved Acceptrance
Determine need 4 change Indifference
Prepare tentative plan Passive Resistance
Analyse probable reaction Active Resistance
Final Choice Overcoming Resistance
Establish Time Table Force Field analysis
Communicate the plan Restraining Forces
Implement Dislike 4 work
The Change Process Over Production
Unfreeze existing behaviour High stds of perf
Attitudinal / Behavioural change Dislie 4 supervisor
Refreeze new behaviour Deriving Forces
Ways of Bringing Change Fear of Dismissal
Coerceive Change fin Incentives
Adaptive Change Fear of loosing previalages
Managed Change Pressures from mng
Crises Management Factors to b Seen While Introducing Change
Further Strategies Place
( after eliminating unnecessary resistance ) Manner
Spread over greater time Scope
Exclude the ones not willing to change Organisation development Methods
Make indvs responsible for Drawbacks
Implementation Using an External Consultant
Decision Making Phases involved
Recognition of problem at work
Resistance To Change Assesing that it cant b soved internally
Change may b Outsourcing the change to external consultants
Psychological change Data gathering
Phsiological change Diagonostic Exercise
Time Identification of weeknesses
Circumtance Cure
Forms / Causes of Resistance Strategy Formulation (FDD)
Communicating to employees
Corporate Culture n Change
Cultural change
Unhealthy Culture
Cultural Gaps
CHAPTER # 21THE CHANGING ENVIRONMENT
KEY TERMS
Political Riskin a decision is the risk that political factors will invalidate the stgy n perhaps will severely damage the firm
ForecastPrediction of future events & their quantification for planning purposes
Forecasting is done to analyse the env & its affect on the bus & what strategies are useful
Strategic Intelligencewhat a comp needs to know about its bus env to enable it to anticipate change & design appropriate strategies
that ll create bus value 4 customers & b profitable in new markets & new industries in future
Exchange Rate The rate at which a national currency exchanges 4 another national currency
Econometrics Study of economic variables & their interrelationship
SUMMARY
Relating Org to environment Technological Env
org Effects may b
task env Gain in output
general env Reduction in Cost
Stgy ensures environmental fit 4 org New type of Products
Complexity Org would have to keep an eye on
Dynamism Type of product / service
Timesacale horizon Production process
short term Ways of Providing services
long term Ways of Identifying markets
Political / Legal environment Social consequences of TecnologyLegal Frameworks
Specific Regulations n Policies of govt in respect of Interest n Pressure Groups any bus / industry ( TR Porter) Exist within n outside the firm
Incentives Cause Group
Entry Barriers Interest Group
DivestmentCompetitors ForecastDemand Time series analysis
Political Risk Regression Analysis
Effect of Govt Agencies on operations
Influencing Govt Policies Strategic Intelligence
Questions to b asked by comps to themselves Strategic Intelligence Model
Economic Environment Sensing
Increase / Decrease in GDP Collecting
Inflation Organising
Tax levels Processing
Govt spending Communicating
Business cycle Using
Gov Policy Sources of Strategic intelligence
Fiscal Policy Internal Monetary Policy External
International Trade n X Rates Key Dimentions In Strategic Intelligence
Floating X rate inf culture
Fixed X rate Future Orientation
Demoraphic Factors imp 4 Org Structure of inf flow
Growth , Age , Geography , Employment Processing Strategic intelligence
Social Structure, Household/ Family Structure Time Horizon
Privatisation of Public sector Organisational Memory
Objectives …………… Env data ought to b included in a Data baseSocial n Culturl Env ………………..
Underlying characteristics of Culture Strength of customer position depends on
Purposeful ……………Learned Internet
Shared Database inf System
Cumulative Workin env in Pakistan
Dynamic
Value 4 Bus
4 Marketing
4 HR Managers
Society can b divided in Subcultures
CHAPTER # 22THE GLOBAL COMPETITIVE ENVIRONMENT
KEY TERMS
Market:comprises the consumers or potential consumers who have needs which are satisfied by a product / service
Industrycomprises those firms which use a particular Competence, Technology, Prouct, or Service to satisfy
customer needsCompetitive Forces
External influences upon the state of actual or potential competition in an industry , whichcollectively determine the profit (long term return on capital ) potential of the industry as a whole
SubstituteA good or Service produced by another industry which satisfies the same customer needs
Competitive PositionThe market share, costs, prices, quality & accumulated experience of an entity or a product
realative to competition
Competitor AnalysisThe systematic review of all available information ( marketing, production, financtial etc )
on the activities of competitors in order to gain competitive advantage
SUMMARYCompetitive Forces
Porter 5 Factor ModelThreat of New Entrants
Entry BarriersThreat From Substitue Products
Bargaining Power of Customers
Bargaining Power of Suppliers
Rivalry among current competitors in Industry
Impact of IT on Competetion
Impact of Globalisation on CompetitionGlobalisation of Markets
DemandSupply
Polices
Factors affecting Globalisation of World Trade
Competitive Advantage Of A Nations Industry
Determinants of National Competitive Advantage
The Dimond Model Porter
Firm Strategy, Structure, Rivalry
Factor Conditions
Related & Supporting IndustriesDemand Conditions
Influencing The Dimond
Interactions between the determinants
Competitor Analysis
Analysing competitors goals
Competitor Response Profile
Management Accountant n Competitor Analysis
Competitor Modelling
CHAPTER # 23THE EVALUATION OF MARKETING CONCEPT
KEY TERMS
MarketingMarketing is the management of Exchange Relationships
Marketing is concerned with meeting business objectives, by providing customer satisfaction
Product Orientationis the management view that success is achieved through producing goods of optimum quality n costs
and therefore , the major task of management is to persue improved production n distribution effeciency
Sales OrientationIs the management ofview that effective selling n promotion are the keys to success
Marketing Managementis the process of Devising, Implementing & Monitoring the Marketing Plan
Marketing Auditis a systematic analysis & evaluation of the org's marketing position & performance
Consumerismis a term used to describe the importance n power of consumers.
Marketing MixA schematic plan to guide analysis of marketing problems through utilisation of
a list of the important forces ementing from the market which bear upon the
marketing operations of an enterprise &
a list of elements ( policies n procedures) of marketing programmes
Mass production techniques shifted the focus from "how to produce enough" to " how to increase demand"
Thinking about the customer needs
A successful stg needs to fit into the external operating environment, but remains consistent with
internal attitudes & beliefs / capabilities
SUMMARY
History of Marketing Marketing Environment
Features of a Market Oriented Organisation The Micro Environment
Market Orientation Vs Sales / Production Orientation The market env the org operates in
Need 4 Sales Force Consumers
Problems in Introducing The Marketing Orientation Distributors
How Marketing Fits into Business Operations Suppliers
Ensure that all deps are working towards same goal Competitors
Scope Of Marketing Interest groups
Product Planning Internal aspects of the org
Branding Culture
Pricing Skills
Channels of Distribution Benefits of understanding the env
Selling Personnel Marketing AuditAdvertising / Marketing Communications Marketing CapabilitiesPromotions Performance EvaluationServicing Competitive Effectiveness
Potential Conflicts between departments The Macro Environment
Concerned with broad trends & patterns in society
Marketing Management PEST factors
Analysis
Planning Ethics / Consumerism
Control Rights of Consumers …….
Marketing Mix
CHAPTER # 24STRATEGIC MARKETING & PLANNING
KEY TERMS
Strategy does not just focus on organisational effeciency. It is more imp that the org shd b effective
Effeciency here relates to doin a task well, but Effectiveness relates to having the right products in
the right place at the right time
Profit first depends on the nature of the stg n 2ndly on the inherent profitability of the industry
SUMMARY
Marketing Strategy Targeting
Components of Strategic Marketing Undifferentiated
Designation of Specific Desired objectives Concentrated
Commitment of resourses to these objectives Differentiated
Evaluation of a range of environmental influences
Advantages n Disadvantages
The Planning Cycle
(Also discussed in chp 2 ) Over differentiated
Where are we now? Marketing Audit
Where do we want to be? Deciding Objectives Positioning Products / Brands
Which way is best? Deciding Strategy Possible positioning characteristics
How do we get there? Deciding Tactics Perceptual map
Getttin there ! Implemention Identifying a gap in the market
Ensuring Arrival ! Controlling Competitive positioning
Fragmented markets n market segments
Marketing Planning & Strategy
Must b in harmony with over all corp goals The Marketing Plan
Corp objestives ll b translated in SMART marketin objs Relationship with overall corp plan
Stgy development links corp n market level plans Phases of Marketing Plan
information may b gathered by Situation Analysis
Situation analysis Objectives n Goals
Swot analysis Marketing Strategy
PEST n other environmental analysis Action Programe
Porter 5 factor model Budgets
Planned activities shd b flexible Controls
Cost focus n differentiation
Formulating Marketing StrategySegmentation Quantify Targets
Steps in Analysis of Segments Other techniques like PLC
Market segmentation n Marketing plan Operational Plan
Properties of each segment Tactical Plan
Basis 4 segmentation
Typical market segment Objectives of devising a marketing mix
Family life cycle
Jicnaras Scale The Marketing Budget
Psychographic segmentation / Life style Segmentation Importance n advantages
Geo-demographic segmentation Matching forecast demand with capacity
Requirements 4 effective market segmentation Advertising budget decision
Measurability Control
Assessibility Allocation of Costs
Substantiality
Segmentation of Industrial market The Marketing Audit
Benefits of segmentation Overviewing the marketing process
Internal n external Aspects
Ansoff matrix
IT in marketing Audit
CHAPTER # 25MARKETING RESEARCH
KEY TERMS
Marketing Research
Market Research
Primary data
Secondary Data
MIS
SUMMARYCharacteristics of Marketing Researh Pre testing / Post testing
Motivational ResearchAim - To Reduce Cost Lab tests
Rating tests
Types of Market Research Test Marketing
Product Research Simulted store technique
Points to b considerd - New Ideas Controlled test marketing
Keeping ongoing goods under review Post testing
Market Research Recall tests
Cost effectiveness Recognition tests
Research Procedures EPOS information
Define Problem Internet
Collection of data D S System
Presentation of data Recording Data about attitudes
Management decisions Likert scales
Design of research Semantic differential scales
Alanysis of data Evaluating Data
price research Statistical Techniques
Sales Promotion Research Multiple Regressio AnalysisDistribution Research Discriminate Analysis
Tests of Statistical Significance
Primary Data Interpretation of ResultsMethods
Experimentatin Secondary Data
Observation Sources
Sampling Internal
Mathods External
Random Sampling
Systematic Sampling Inhouse or External agencies
Multistage Sampling Advantages / Disadvantages etc
quota Sampling
Cluster Sampling Management Information SystemPotential Faults Contains inf from
Questionaries Internal reportsPostal Surveys Marketing Intelligence sysConsiderations in designing Marketing Research System
Consumer Pannels Analytical Marketing SystemTrade Audits / Retail Audits Considerations 4 a good storage n retrival sys
Qualities of InfDissemination of infDesign of MIS
Basis .... User needsComponents
Sys inputsData ManipulationSystem outputs
CHAPTER # 26PRODUCT
KEY TERMS
Product In the Context of marketing a "product is something that satisfies a set of wants" that a customer have
Consumer Goods Sold directly to the person who will ultimately use them
Industrial Goods Used in the production of other goods
PL Cycle Plc has an almost biological basis. It asserts that products are Born (or introduced),
grow to reach maturity, n then enter old age n decline
Product Portfolio A comps product portfolio is all the product lines n items that the comp offers 4 sale
Pr Markt Matrices Used to classify a product or even a business according to the features of the market and of the product
Services Any activity of benefit thatone party can offer to another that is essentially intangible n doesnot result in ownership of anything
Inovation is the life blood of a successful org n the management of this innovation is central to its success
It may b immpossible to obtain influence orcontrol over perception of what is good or bad customer service
Effective marketing strategy ensures that the orgs resources are directed to the most suitable market segement
SUMMARYThe Product New Product Development
Attributes of a Product New prod may b developed by ...Tangible Attributes (Quantitative) Technical break throughsIntangible Attributes (Qualitative) Change in society
these may b interlinked To copy n capitalise on success of
Product Classification existing products
Consumer Goods What is anew product .....
Convinience goods Opens new markt
Shopping Goods Replacs existing prod
Speciality Goods Brodens existing market
Unsought Goods An Old product can b new if...Industrial Goods Introduced to new market
Installations Packaged differently
Accessories eg PCs Differet marketing approachRaw materials Change in marketing mix
Components Degrees of Newness
supplies Unquestionably New products
Partially new products
The Product Life Cycle (PLC) Major product ChangePhases Minor Product change
Introduction Sources 4 New Products
Growth Liscencing , Acquisition etcMaturity Screening New Product IdeasDecline Graph
Senility Y axies - # of new ideas
Exceptions X axies - Stages in screening process
Buyers through PLC stages Initial assessment
How are PLCs assesed ? Bus Analysis
Decisions to b taken after assesment Development
Criticism of PLC Test Launch
Strategic Implications of PLC Launch
CommersialisationProduct Portfolio Planning New Product Development Plan
Product Mix ( Ascepts / Chrs of portfolio ) Only take new prod to adv stage if Width Adequate demandDepth Compatible with existing mrkt abilityConsistency Compatible with existing production ability
Extending the product mix StagesConception of Ideas
Product Market Matrices Screening of ideasThe BCG Matrix Bus Alanysis
Stages Product DevelopmentProblem Child Marketing Mix IssuesStar Product LaunchCash cowsDogs Services n Servie Marketing
Criticism Distinguishing Features - Goods vs ServicesThe GEBS Matrix Intangibility
Classifies products or bus according to : InseparabilityIndustry Attractiveness HeterogeneityBusiness Strength Perishability
(Strong , Avg , Weak) ownershipWays of Countering it
Packaging Intanginility - As a matter of degreeFunctions Marketing Implications
Protection of contents HeterogeneityDistribution Marketing Mix 4 ServicesSelling 4 Ps + 4 moreuser Convenience PeopleConfirm to govt regulations Process
Physical evidenceQualities required of good packaging Personal SellingPackaging - an imp aid to selling Quality Differentiators
Product Vs Service
CHAPTER # 27PRICE
KEY TERMS
PriceCan be defined as a measure of the value exchanged by the buyer for the value offered by the seller
It reflects the cost of producing the product to seller n the benefit of consuming the product to buyer
Price Sensitivity
Refers to the effect a change in in price ll have on customers
SUMMARY
Price Methods of Price Determination
A competitive tool to differentiate a product Price setting in Theory
Shd b consistent with other elements of mix Price Elasticity of Demand
Contributes to overall image of product % change in qty demanded
Objectives specified 4 pricing decision % change in price
Maximising profit Price setting in Practice
Maintaining or Maximising Market share Market Pentration Objective
Market Skimming Objective
3 main influences on Price Early Cash Recovery Objective
Cost Product Line Promotion Objective
Competition Intermidiate Customers
Demand Cost Plus Pricing
Price Sensitivity Target Pricing
It ll vary amongst purchasers Price Discrimination
Those who can pass it to others ll Going Rate Pricing
be least sensitive Quantum Price
General Findings Od Number Pricing
Typical Demand curve One Coin Purchase
Curve not a straight line Gift Purchase
Exceptions Product Line Pricing
Factors affecting pricing Decisions Competitive Pricing
Intermidiaries' objectives Price Leadership
Competitors actions
Suppliers Absorption n Marginal Costing
Inflation
New product pricing Breakeven Analysis
Income effect Breakeven point =
Multiple products total fixed cost
Price sensitivity contribution per unit
Quality Connotations
CHAPTER # 28PLACE
KEY TERMS
PLACE Is concerned with the selection of "distribution channels" used to deliver goods to consumers
Distribution ChannelsThe institutions through which goods or services are transfered from producers to consumers
Logistics Management
involves "Physical distribution" n "Material management" encompassing the inflow of rawmaterials n goods
n the outflow of finished products
Just in timeaims to "produce instantaneously , with perfect quality n minimum wastage" + getting customer satisfaction
Customer loyalty is no longer to be taken for granted
The keyword of modern market place is Flexibility
SUMMARY
Functions Involved in Distribution Process Factors favouring Use of
Transportation Direct Selling
Stock Holding n Storage Intermediaries
Local Knowledge
Promotion Multi-Channel Decisions
Display
Industrial n Consumer Distribution Channels
Types of Distributors
Retailors Channel Dynamics
Whole Salers Vertical marketing sys
Distributors / Dealers corp marketing sys
Agents contractual marketing sys
Franchising administered marketing sys
Multiple Stores
Direct Selling Logistics Management
Advantages
Considerations in Choseing Distribution Channels Functions
Direct / Indirect Distribution Channels Organising
How far the manufacturing comp wishes to carry out Inventories
various marketing functions like Ware houses
Bringing buyers b sellers together Purchasing
Offering sufficient choice of goods Packaging
Forming a favourable opinion of goods Just in time
Distribution - Factory to Retail outlets
Maintaining adequate sales level Distribution n New Technologies
Aftersales service Changing ways of conducting business
Credit policy Mobiles
Maintaining acceptable price E Commerce
How many intermidiate stages shd be used Digital technology
Customers Cable n Digital Television
Product characteristics Internet
Distributor Characteristics DTRV
Competitor's Channel choice
Supplier characteristics International channels
Market Exposure required
Intensive distribution strategy
Exclusive ...............................
Selective ...............................
CHAPTER # 29PROMOTION
KEY TERMSPromotion is concerned with communication btw the seller n buyer.
Promotional Mix There are various communication mediums available to the org. In firms with a coordinated promotional strategy the activity
of the sales team will be supported n supplemented by a combination of other communication tools
This combination is reffered to as the Promotional Mix
Marketing theory suggests that a range of tactics is more succesful than "putting all ur eggs in one basket"
The sales person must b aware that it is not just "what is said" which has an impact.
"how something is said" communicates the sales person's attitude to customers
Sales Promotion are those marketing activities other than personal selling, advertising n publicity, that stimulate consumer purchasingand dealker effectiveness. Sales promotion includes displays, exibitions, n demonstrations
There is often a direct link btw sales promotion n short term sales volume
Merchandising Merchandising is concerned with putting the manufacturer's goods in the right place at the right time
Exhibitions n are events usually organisedby an outside agency or trade / professional association , that gather related industry players Trade Fairs together to communicate ideas , n hopefully generate new business
Advertising any paid form of non personal presentation n promotion of ideas , good or services by an identifiable sponsor
AIDA Model It is "hierarchy of effects model" Awarenes - interet - Desire - Action
Relationship is a new body of theory within marketing that changes the focus away from getting customers to keeping customersMarketing A sale is not the end of the process but distinctively the start of an orgs relationship with customers
Branding A brand is a Name, Term, Sign, Symbol or design intended to identify the product of a seller n to differentiate it from those of competitors
Trade Mark is a legal term covering words n symbols
SUMMARY
Promotional Mix Advertising
Org's promotional mix AIDA model
Sales Promotion Purpose of Advertising
Sales Literature Classification
Peronal Selling Informative advertising
Exhibitions Persuasive Advertising
Public Relations Reminding Advertising
Advertising Above the line n Below the line
Specific goals of an advertising compaign
Combining Promotional Techniques Role of Advertising in Industrial Marketing
Advertising's Fundamental objectives Awareness building
Sales Promotion objectives Comprehension building
Sales force objectives efficient Reminding
All these compliment each other Lead Generation
Push n Pull effects Legitimisation
Reassurance
Peronal Selling n Sales Promotion Planning a Promotional Compaign
Elements in Process of Personal selling Stages Involved
Sender Identify The Target Audience
Message Specify The Promotional Message
Channel Select Media
Receiver Schedule Media
feedback Set The Promotional Budget
Paying the sales force Evaluate Promotional Effectiveness
Agents on commission only basis Successful advertising
Salaried employees on salary with bonus Advertising Agencies
Sales Promotion Relationship marketing & Key Account management
Have more direct effect on usage than does advertising Auditing Fulfilment of customer Needs
Examples Typical factors to identify a Key Account
Consumer promotions Historic value of purchases
Retailer or Middleman Promotions Expected future purchases
Sales force promotions Other competitive factors
Industrial Promotions Extra Resources Devoted to Key account
Objectives of Sales Promotion Time
Finance
Merchandising procedures
Right place Hospitility
Right Time
Point of sale Material Branding
Reasons 4 branding
Exhibitions n Trade Fairs Branding Strategies
Advantages Family Branding
To visitors Brand Extension
To manufacturers Multi Branding
Trade Marks
Publicity n Public Relations
Sponsorships
Advntages
Technological Developments
CHAPTER # 30GLOBALISATION
KEY TERMS
Scarce Resourcesis a resource 4 which the quantity demanded at nil price would exceed the available supply
Scarcityis the excess of human wants over what can b produced
Choice is only necessary because the resources are scarce
Production Possibility Curve (PPC)PPC illustrates the need to make a choice about what to produce when it is not possible to have everything
Oppertunity CostThe cost of an item measured in terms of the alternative forgone is called OC
Absolute advantage A country is said to have an Absolute advantage in the production of a good when it is
more effecient than the other country in the production of that good
Comparative AdvantageThe law of comparative advantage states that two countries can benefit from trade when each specialises in
the industries in which it has lowest oppertunity cost
Here one has to decide if it would b cheaper to produce a good or to import it
Purchasing power parityThe PPP approach is to calculate an exchange rate based on the relative cost of purchasing the same basket of goods in 2 countries (eg price of 'big mac' in different countries)
Transnational environmentEach regional n national unit achieves global scale n influence within overall org by exploiting its
specialized competences on behalf of the whole comp. R & D etc may b centralized
SUMMARY
Economic Fundamentals Protectionism in International Trade
Limited Resources n Scarce Means Discouraging of Imports By GovtStudy the nature of Choices Objectives
what ll b produced To protect home market
what ll b consumed Political factors
who ll benefit from consumption Others
Methods
Production Possibility Curve (PPC) Tarrif Barriers
Non Tarrif barriers
Qty of B Indirect Barriers
Regional Trade Groups
Global Stratigic Management
Qty of A Globalisation
Oppertunity Cost Management Orientation
Ethnocentrism
Economics of International Trade Polycentrism
Absolute Advantage GeocentrismComparative Advantage Regiocentrism
Reasons to export ( Covered in chp 31 )Arguments against Specialisation Developing the Global BusinessMoney n Trade Expoting Ethnocentrism
Exchange Rate Risk Overseas Branch Ethnocentrism
3 Types of excahange rates Overseas production Ethno but low level
Fixed Insiderisation Polycentrism
Managed Global company Geocentrism
Floating
Purchasing power parity Designs for Global Businesses
Requirement 4 local adaptation n responsiveness
high low
Pressure to high Global env Transnational env
Globalise low International env multinational env
CHAPTER # 31GLOBAL STRATEGY
KEY TERMS
Undifferentiated Marketing
Differentiated Marketing
Concentrated MarketingExclusive DistributionSelective DistributionIntensive DistributionLogistic management
SUMMARY
The International Planning Process HR Issues
Reasons to Export Expatriates Vs Local Staff
Difference between Domestic & Intern Bus advantages & disadvantages
Cultural Factors HRM
Economic Factors Recruitment
Competitive Factors ( data availability etc) Career Management
Technological factors Appraisal scheme
Objectives - the starting point of planning Communication
Modelling Strategic Planning Process Culture n the Org
Preliminary Analysis & Screening Variety of Culture due to varied mambersAdopting marketing mix to target markets Corp Culture
Developing the marketing plan Management Culture
Implementation n Control Hofstede Model of National Culture
International Marketing Research Distribution (Placement)
Advantages Strategic importance of Distribution .......
Objectives Key issues in distribution
Strategic Questions for IMR Coverage n Density
Information Sources Channel Length
Human Sources Power n AllignmentDocumentary Sources Logistics
Direct Observation / Personal experience Distribution Channels
IMR Process Qualities of a good distribution channel
Monitoring Consumer trading Channels
Investigation Bus Trading channels
Research Buyer behaviour n Culture
Using IMR Data Product features ( affect choice )
Problems in IMR Competition ( indicate usual form of trad chanels )
Comp objectives in market
Modes Of Entering An Overseas Market Motivating Agents
Exporting ( Direct / Indirect) Methods
Overseas Production Difficulties
LiscencingDeterminants of Decision International Physical Distribution
Logistic managementStandardisation / Adaptation Services
3 broad types of marketing mix Reason 4 DevelopmentUndifferentiated MarketingDifferentiated Marketing Controlling Global PerformanceConcentrated Marketing What stds to b adopted?
Barriers to Standardisation Ways of establishing stdsEnvironmantal Variables relating to 4 Ps Local help
Economy International comparisonCulture Obtaing Performance informationCompetition Control of intermidiariesLaw
Products n Communication Social n Cultural BehaviourDemographic issues in overseas marketing
Study of population n their characteristicsBuying Patterns
Behavioural DeterminantsInhibitors
Socio economic statusFamily structure
CHAPTER # 32APPRAISAL OF OVERSEAS INVESTMENT DECISIONS
KEY TERMS
Political Riskis the risk that political action ll affect the position n value of a comp
Tax saving oppertunities may b maximised by structuring the group n its subsidiaries in such a way so as to take the best advantage of different local tax systems
Method of financing a subsidary ll give some indication of the nature n length of time of the investment that the parent comp is prepared to make
SUMMARYForms of Foreign Direct Investment Political Risk n Blocked Funds
Foreign Direct Investment (FDI) Govt may impose restrictions / BarriersNew startup investments Tarrif n non tarrif barriers etc Overseas subsidiary ( as discussed in chp 31 )
Wholly ownedPartially owned Strategies to limit Political Risk
Take over or Mergers Negotiation with host govt
Joint Ventures etc Insurance
Industrial Co-operations Production strategies
Joint Equity Contacts with markets
Alternatives to FDI Financial Management
Exporting Management structure
direct Exports
Indirect Exports Exchange ControlsExport houses To restrict the flow of Foreign exc into n out of Specialist Export mng Firms a country Govt may impose following restrictions
Complementary exporting Rationing the supply of Foreign exchLiscencing Restricting the types of transactions
International Capital structure Decisions Ways of overcoming Blocked Funds
Points to b considered while raising Finance 4 subsid High Transfer pricing
Equity policy RoyaltyDividend policy High Interest on Loans
Pattern of holding Management Charges
Borrowing policyWorking cap policy Taxation in Multinationals
Tax Planning
Currency risk in financing a subsidiary Foreign tax credits
Advantages of borrowing in same currency to avoid double taxation
Tax heavens
Factors influencing choice of Finance 4 subs
Local finance costsTaxation systemRestrictions on dividend remittanceRepayment schedules
Other factors to b consideredReduced systematic riskAccess to capitalAgency cost
CHAPTER # 33RAISING CAPITAL OVERSEAS
KEY TERMS
International Banks
International Banking Consists of
Transactions in domestic currencies with overseas organisations
Transactions that donot take place in Domestic currencies
Funds from overseas might b used by multinationals n other large orgs to finance fixed assetacquisition or working cap in domestic bus operatios
Euro Currency Marketsinvolve the deposit of funds with a bank outside the country of origin of funds
n relending these funds 4 a fairly short term (3 months or so) usually at floating rate
Euro Creditsare Medium - Long tem int bank loans which may b arranged by indv banks or by syndicated of banks
Euro Bondsis a bond issued in a cap markt denominated in a currency which normally differs from that of the country of issue
n sold internationally
Euro EquityEuro equity issue ia an issue of equity in a market outside the enterp's own domestic mrkt
Commercial Paperis a short term Fin Inst issued by a comp
In the form of unsecured promissory notes with a fixed maturity ( 7 - 90 days or even a year )
Issued in Bearer form
Issued on Discount bases (interest rate implicit)
Syndicated CreditsA credit in this context is a facility whereby a borrower can borrow funds when required but might infact not takeup
the full amount of the facility. This differs from a loan which involves an actual transaction 4 a specified sum 4 a
particular period of time ( int rates are usually high )
Multiple Option FacilitiesComprise a variety of Instruments through which comps can raise funds , These includes
Note issuence facilities
Revolving Underwriting Facilities
SUMMARY
Factors affecting development of Int BankingGlobalisationSecuritisation
DisintermediationIncreased Fore exch n int rate VolatilityDeregulation
Int Banks Assists Comps in Following Ways
Financing Foreign tradeFinancing Cap MarketsInt Cag mng servicesProviding local banking services
Trading in fore exch n currency optionsLending n borrowing in euro currency mrkt
Participating in syndicated loan facilitiesUnderwriting Euro bondsProv of advice n inf
CHAPTER # 34FINANCIAL CONTROLS WITHIN MULTINATIONALS
KEY TERMS
Treasurship
is a function concerned with prov n use of finance
Treasury Department
Setup by large comps to manage cash n foreign currency
Multilateral Netting
In case there are a large number of foreign currency transactions btw didd subsidiaries the obligations of diff subsidiaries may b
netted off against each other on multilateral basis........... Reducing cost of transactions
Float
Amount of money tied up btw the time when payment is initiated n the time when the funds become available 4 use in the
receipients' bank A/C eg where cheque is sent by post
Cash Management Services
Service provided by bank to its corprate clients, who can obtain the inf about their different bank accounts regularly
through computer terminal in the comp's treasury department , linked to the banks computer.
The company can then manage to move cash from one account to another n so can manage its cash poition effectively
Cash Pooling
A procedure whereby debit n credit balances held with the same bank by comps within a group are setoff against
each other so that int cost can b reduced
Usually it involves transfering all the balances in a dummy account at the end of each day
Role of Internationl Holding Company
The level of control exercised by holding comp ll depend on which decisions are the responsibility of holding comp
n which is that of the subsidiary
Best approach is the coordination with central holdin comp having the final say in major decisions but the local operations
having a substantial input in terms of providing inf n opinion
Returns From subsidiaries
Management of the parent comp must decide how the total profits of the group shd be divided btw the parent comp n each
of its subsidiaries, which is likely to depend on the transfer prices adopted n how the parent comp shd obtain the cash return
that it wants from each of its subsidiaries
Transfer price
is the price at which goods or services are transfered from one process department to another or
from one member of group to another
If cash mng is centralised in a multinational, each subsidiary holds only the minimum cash balance required
for transaction purposes , all excess funds ll b transfered to central treasury department
CHAPTER # 34FINANCIAL CONTROLS WITH IN MULTINATIONALS
SUMMARYTreasureship Short Term Investments
Includes provision of Temporary cash surplus may arise due toCapital Increase in profitabilityShort term borrowings Low capital expndituresForeign currency management High cash receiptsBanking Utilization of SurplusMoney market ivestment Keep cash in hand
Short term or Long term investment
Treasury Department Buy back shares
Dividend
Role of Treasurer Forms of Short term Investments
Corp financial objectives Bank Deposit
Liquidity management Stock exchangeFunding mng Long term debt instruments
Currency mng Short term debt instrumentsCorporate Finance Certificates of depositsRelated subjects Treasury Bills (IOU issued by govt)
Eligible bank bills
Centralised or Decentralised Cash Management B O Exchange
Advantages n Disadvantages Local Authority bonds
Commercial paperTreasury dep as Cost Centre or Profit Centre
Considerations in treating it a Profit Centre Role of Internationl Holding Company
Competence of staff Problems in Treatin sub as profit centre
Controls No Advantage of group level strategies
Availability of Up to date Information No optimal profit maximising behaviour
Mng attitude to risk Low manipulation of Global Oppertunities
Transfer pricing Difficulties of Coordination
Performance Evaluation Geographical differences
Different markets currencies n products
Payments Between Companies Political n economic RiskCheque Increased # of decisions to b taken
Advantages Disadvantages Lack of local knowledgeMeasures to reduce Float Lack of communication
BOE / IOU Low motivation 4 managers
Bank Drafts
Mail Transfer Returns From subsidiaries n Transfer pricingTelegraphic Transfer Basis Determining Transfer pricingSwift Standard costInternational Money Orders Marginal CostLetter of Credits Oppertunity Cost
Full costCash Management Services Market price
Market price less discountCash Pooling Negotiated price
Other factorsBusiness ethics Shd be consistent with overall aims of org
Problems Risk reduction objectivesDifferent stds of code of conduct Fund managementDifferent priorities in different countries Interests of Minority ShareholdersTax advantages may b taken as tax evasion Tax minimisationCulture
Discussed in detail in chp 11 Evaluation of Performance of Overseas OperationsUse of Financial statements
ProblemsCurrency to b used ?Economic envResponsibility reporting
Budget analysisMostly translatyed in parent comp language
CHAPTER # 35
MANAGEMENT OF INTERNATIONAL TRADE
KEY TERMS
Factoring
Is an arrangement to have debts collected by a factor comp, which advances a proportion of the money it is due to collect
it may also include administration of the client's invoicing, sales accopunting, n debt collection services
and credit protection ( insurance ) for the client's debts
Forfaiting
means provision of medium term finance for export sale os machinery for which the payment is to be made over an agreed
number of years. The term may also b applied to short term financing
International Credit Unions
are organisations or associations of finance houses or banks in different countries (in Europe)
having reciprocal arrangements for providing Instalment credit Finance
Countertrade
is a general term used to describe a variety of commercial arrangements for reciprocal international trade
or barter btw coms or other orgs in two or more countries
The common characteristic of counter trade is that export sales to a particular market are made conditional
upon undertakings to accept imports from that market
In some cases it might b the only way of getting an export order
SUMMARY
Methods For International Finance Export Credit Guarantee SchemesRisks of Intern Trade Objectives
Physical Risks (theft etc) Increase in International tradeCredit Risk ( due to low inherent risk )Exchange rate Risk Covering preshipment risks of exportTransaction Risk Types of Guarantee
Rewards of Intern Trade Post ShipmentMore growth potential ComprehensiveStrong product life cycle Selected market guaranteeRisk Reduction Preshipment financeEco of ScaleEarly warning of changes in env Counter Trade
Types of countertradeing arrangements
Finance for Foreign Trade BarterTime consuming (Dead investment) CounterpurchaseGreater chances of bad debts Buyback ( paying in the form of output of plant etc )
Methods of reducing investment in debtors OffsetDemand early payments Switch Trading (3 country investment)Advance against collection Why Countertrade?Documentary credit Countries lack commercial creditNegotiation of bills / cheques or Foreign exchange reserves
To boost developing manufacturing industriesAdvantages of using B O Exchange in Int Trade Political or economic policies
To obtain more orders or technologyReducing bad debt risk Problems
Export Factoring Cost misght exceed expectationsAdvantages Unrealistically high values
Prompt payments to suppliers Increased risk of cncellationOptimum stock levels Perishable goodsFinancing growth through sales Administrative problemsLinking finance to volume of sales Dispute on agreeing costsNo problem of Slow paying debtors Costs of CountertradeNo need 4 sales ledger dep Fees of specialist consultants
Forfaiting Discount or 'disagio' to dispose of the goodsParties involved Fees payable to any 3rd party
Exporter of cap goods InsuranceOverseas Buyer wanting Medium term cr Bank feesForfaiting BankAvalising Bank
Documentary Credit ( LC )International Credit Unions
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