Study Material for Advanced Management

1. Strategy narrowly defined means the art of the general which is derived from the Greek th word Stratagos. The term first gained currency at the end of the 18 century and had to do with stratagems by which a general sought to deceive an enemy, with plans made for a campaign and with the way the general moved and disposed his forces in war Benefits and relevance of strategic management Helps envision an organizations future Articulation of mission, objectives & formulation of strategy helps people in organinization what the company stands for , the development path charted out and what are the planned results over a period of time. Facilitates better delegation, co-ordination, monitoring, performance, evaluation & control SWOT analysis which is a part of strategic management helps company to adopt suitable strategies for exploiting opportunities and combating threats A company pursing strategic management will be continuously monitoring the environment and making modifications of strategy as and when required so that the plans are made more realistic and effective Strategic management enables company to meet competition more effectively Strategic management makes management more dynamic, appropriate to the environment and result and future oriented. Strategic management process The Strategic Planning Process

S e ek Commitment

Specify Objectives

Gen erate Strategies

Evaluate Strategies

Monitor results

Advantages/Benefits or relevance of strategic management Provides a structured means of analysis and thinking about complex strategic problems. Can be used to involve people in strategy development A way to communicate the intent of management to members of the organization.

Can be used as a means of control by regularly reviewing performance and progress against agreed objectives. Helps envision an organizations future Articulation of mission, objectives & formulation of strategy helps people in organinization what the company stands for , the development path charted out and what are the planned results over a period of time. Facilitates better delegation, co-ordination, monitoring, performance, evaluation & control SWOT analysis which is a part of strategic management helps company to adopt suitable strategies for exploiting opportunities and combating threats A company pursing strategic management will be continuously monitoring the environment and making modifications of strategy as and when required so that the plans are made more realistic and effective Strategic management enables company to meet competition more effectively Strategic management makes management more dynamic, appropriate to the environment and result and future oriented. 2. Merits and demerits of MNCs Merits Help increase investment level Act as vehiches for transfer of technology Enable host countries to increase their exports and decrease their import requirements Help equalize factors of production around the world Provide efficient means of integrating national economies Commendable contribution to R&D, inventions and innovations Stimulate domestic enterprise Help increase competition and break domestic monopolies Demerits MNCs technology aimed at profit maximization rather than development needs of poor countries. Evade/undermine national economies due to their enormous clout. May destroy competition and acquire monopoly powers Threaten sovereignty of nations due to their clout Retard growth of employment in the home country Cause fast depletion of some non renewable natural resources in the host country Transfer pricing enables MNCs to avoid taxes by manipulating prices on intra company taxations Questionable business practices in host countries 3. Motives/ advantages and disadvantages of M&As. Market entry Possession of marketing infrastructure Achieving economies of scale Increasing market power Diversification Acquisition of technology Use of surplus funds Optimum utilization of resources and facilities Product mix optimization Pre emptive strategy Vertical integration Tax benefits Logistical factors Acquisition of brands

Minimization of risks Regulatory factors Disadvantages Indiscriminate acquisitions land several companies in financial and other problems When a company is taken over, its problems are also taken over If adequate homework was not done and evaluation was not right, then acquisition decision could be wrong Some of units acquired would have problems such as old plant, obsolete technology, surplus or demoralized labour The company may not have the experience and expertise to manage the unit taken over if it is in an entirely new field 4. Essential conditions for globalization Business Freedom Facilities Government support Resources Competitiveness Orientation 5. Features of a transnational economy according to Peter Drucker Transnational economy is shaped by money flows rather than by trade in goods and services. Management has emerged as the decisive factor of production and traditional factors of production land, labour and capital has increasingly become secondary. In a transnational economy the goal is market maximization and not profit maximization Trade which increasingly follows investement is becoming a function of investement. The decision making power is shifting from national state to the region (ie regional trading blocks) There is a genuine- and almost autonomous- world economy of money, credit and investement flows. It is organized by information which no longer knows national boundaries Finally there is a a growing pervasiveness of the transnational corporations which see the entire world as a single market for production and marketing of goods and services. 6. Human Development Report, 1997 suggestion to the poorest developing countries in the world to benefit out of globalization. A more supportive macro economic policy environment for poverty eradication A fairer institutional environment for global trade A partnership with MNCs to promote growth for poverty reduction Action to stop the race to the bottom Selective support for global technology and R&D priorities. Action on global debt

7. Various orientations of global companies Ethnocentrism Polycentrism Regiocentrism Geocentrism

8. Human Development Report 1999 on some of the new features of globalization New markets Growing global markets in services-banking,insuarance & transport New financial markets-deregulated. globally linked, working around the clock, with action action at a distance in real time, with new instruments such as derivates Deregulation of antitrust laws and proliferation of M& As Global consumer markets with global brands New actors MNCs integrating their production and marketing, dominating food production. The WTO- the first multilateral organization with authority to enforce national governments compliance with rules. An international criminal court system in the making a booming international network of NGOs Regional blocks proliferating and gaining importance More policy coordination groups-G7, G40, G-22, G-77, OECD New rules and norms Market economic policies spreading around the world with greater privatization and liberalization than in earlier decades. Widespread adoption of democracy as the choice of political regime Human right conventions and instruments building up in both coverage and number of signatories-and growing awareness among people around and world. Consensus goals and action agenda for development conventins and agreements on the global environment-biodiversity, ozone layer, disposal of hazardous wastes, desertification, climate change multilateral agreements in trade, taking on such agendas as environmental and social conditions New multilateral agreements on trade, taking on such new agendas as environmental and social conditions New multilateral agreements-for service, intellectual property, communications-more binding on national governments than any previous agreements The multilateral agreement on investment under debate New (faster & cheaper) tools of communication Internet and electronic communications link many people simultaneously Cellular phones Fax machines Faster and cheaper transport by air, rail and road Computer aided design 9. Advantages and disadvantages of globalization Advantages Foreign capital if properly utilized can make substantial contribution to the economic development of a nation Productivity gains increased competition make companies more cost and quality conscious Global competition and imports keep lid on prices Liberalization and global competition enhance consumer choice and consumer surplus An open economy spurs innovation with fresh ideas Unfettered capital flows give the country access to foreign investment and keep interest rates low. Globalization opens up enormous domestic and global opportunities for firms in developing countries Disadvantages The global dominance of industries by MNCs is on the rise Many countries are indiscriminate in liberalizing foreign investement. Pepsi, coke and junk food are allowed even in countries like china.

A number of countries allow high foreign stake even in industries where that is not really required. This could affect domestic enterprise of developing countries There have been a large number of cases of takeover of national firms by foreign firms. Nexus between MNCs and governments are not uncommon Replacement of traditional and indigenous products by modern products resulting in the ruin of traditional crafts and industries affecting the livelihood of people. One of the common criticisms is that the technology the MNCs bring may not be one suited for the host country. Sometimes MNCs dump obsolete technology in developing countries.