The opposite of integration (a firm’s growth, in number of businesses) is outsourcing value-creation activities to subcontractors. In recent years there has been a clear move among many enterprises to outsource non-core or non-strategic activities. Any function can be outsourced, if it is not critical to a firm’s success (is not one of its distinctive competencies). Outsourcing begins with a identification of a firm’s distinctive competencies–these will continue to be performed within the company. All other activities are then reviewed to see whether they can be performed more effectively and efficiently by independent suppliers. If they can, these activities are outsourced to those suppliers. The relationships between the company and those suppliers are then often structured as long-term contractual relationships. Continue reading
Strategic Management
Strategic management is the art and science of formulating, implementing and evaluating cross-functional decisions that will enable an organization to achieve its objectives. It involves the systematic identification of specifying the firm’s objectives, nurturing policies and strategies to achieve these objectives, and acquiring and making available these resources to implement the policies and strategies to achieve the firm’s objectives. Strategic management, therefore, integrates the activities of the various functional sectors of a business, such as marketing, sales, production etc. , to achieve organizational goals. It is generally the highest level of managerial activity, usually initiate by the board of directors and executed by the firm’s Chief Executive Officer (CEO) and executive team.
Role of Luck in Strategic Management
While some firms hope to yield above expected normal returns from implementing business strategies, they must however be consistently conversant with the future value of those strategies than other firms playing in the same market. Other firms gain advantage in strategy implementation which is either a manifestation of these special insights into the future value of strategies, or a manifestation of a firm’s good fortune and luck, as sometimes, the price of the strategic resource acquired may be based on expectations on the return potential of that strategy However, unexpected greater organisational profits can simply be unexpected, a surprise, and a manifestation of a firm’s good luck and possibly not its ability to accurately anticipate the future value of a Continue reading
Effects of Innovative Culture on Organizations
Growth creates a need for structure and discipline, organisation changes which can strain the culture of creativity that is so vital to future success. To sustain competitive advantage, companies need to institutionalize the innovation process; they need to create an internal environment where creative thinking is central to their values, assumptions and actions. Management changes and management generally is about implementation. When the managers of an enterprise feel pressured, the fear-driven response is generally to implement better and which generally results doing more of the same only quicker or cheaper. While this is great for doing more of the same, it is still the same and meanwhile everything else is changing — customer’s needs, technology, society, macroeconomics and geopolitics are Continue reading
Role of Management Accounting Information in Strategy Formulation
Management accounting can be defined as a process of providing appropriate information primarily intended to assist managers in making better decisions. In previous years, management accounting techniques like traditional budgeting, cost-volume-profit analysis, standard costing and variance analysis, were adaptable to the business environment when product varieties were few, competition was low, overhead costs were relatively low, automated processes were minimal and firms were mostly labor intensive. However, many businesses and environments began to evolve as a result of technological changes, globalization and changing customer mix. Authors identified inadequacies in these techniques, when used as tools in planning and control decisions. Awareness amongst companies on the need to achieve excellence in manufacturing/service delivery and use such an achievement as a strategy Continue reading
Differences Between Management Control and Operational Control
Meaning of Operational Control Operational control or task control is the process of assuring that specific tasks are carried out effectively and efficiently. The focus of operational control is on individual tasks or operations. For instance, it is concerned with scheduling and controlling individual jobs through a shop rather than with measuring the performance of the shop as a whole. It involves control over individual items for inventory rather than the management of inventor as a whole. Operational control is concerned with activities that can be programmed. For instance, if the demand for an item, the cost of storing it, its production cost and production-time, and the loss involved in not filling an order are known, then the optimum inventory Continue reading
Importance of Management Control in an Organization
Importance of Management Control Control is an indispensable function of management. Without control function, the management process is incomplete. In business organizations, the need for control arises due to several factors; Firstly, it is difficult to establish fully accurate standards of performance in large and complex organizations. An executive needs all kinds of timely information, which are not always available. Control is required to judge the accurate of standards. Secondly, there are several temptations in business. Employees are entrusted with large sums of money and valuable resources. In the absence of control employees may yield, to these temptations. An efficient control system helps to minimize dishonest behavior on the part of employees. Thirdly, in the absence of control employees may Continue reading