Economy and Organization of Enterprises

1. The Enterprise, definition and mode of analysis.

2. Classification of enterprises.

3. The systemic approach of the company

4. The commercial activity of the company,

5. The productive activity of the enterprise,

6. Logistics in the company,

7. The financial activity of the company,

8. Business organization structures,

9. The decision system,

10. Human resources management,

11. Strategy in an enterprise (Strategic analysis of the company Choosing and implementing a strategy)

12. The company, the society and culture,

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AN ENTERPRISE

An enterprise is a business which carries out economic activities either for profit or non-profit motive.
Business undertakings are conducted by individuals (sole traders), by two or more persons in
partnership, by public boards and corporations both privately owned and state corporations and in
associations such as cooperatives. They are several ways in which they can be classified. However,
broadly, they can be classified into sole proprietorship, partnership, joint stock companies, public
corporations and cooperatives.

Classification of Enterprises

Enterprises can be classified according to different criteria; each of these is base on the knowledge of
certain phenomena. Any classification therefore takes importance in relation with the aim of
knowledge we want to achieve it seems useful to classify enterprises in accordance with:

 The goal to be attained

 Size of the enterprise
 The juridical form
 The nature of activities
 Scope of activities

Classification according to the goal of the enterprise:

This refers to the reason the enterprise was created. That is, some enterprises are created for the
purpose of making profits while others are not for profit making. This implies some enterprises are
profit making while others are not for profit making e.g. NGO and other humanitarian organisations

Classification according to the Size of the enterprise

Enterprises may be classified as micro, small, medium size and large scale enterprises. This
classification is done on the basis of capital, the number of employees and the turnover per quarter or
annually. For example, any enterprise with less than 500employees is a small and medium size
enterprise.

Classification according to the juridical form

Enterprises may be classified according to their legal form. This implies, they may be sole
proprietorship, partnership, joint stock companies, public corporations, cooperatives, etc.

Classification according to the nature of activities

The classification of enterprises according to the nature of activities will depend on the sector or
industry in which the enterprise operates. Enterprises within the primary sector are known as
extractive enterprises such as those engaged in mining, fishing agriculture, quarrying, lumbering, etc.

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those within the secondary sector are called manufacturing or construction enterprises while those in
the tertiary sector are in charge of distribution and the provision of both direct and indirect services.

Classification according to Scope of activities

Some enterprises are classified as local enterprises, satisfying the needs of local customers while some
are international, multinational and global enterprises catering for the needs of wider world as a single
market.

The systemic approach

The System Approach of an Organisation

THE SYSTEM APPROACH

This is an approach which views an organisation as a unified, directed system of interrelated parts. It
emphasises that the whole is greater than the sum of the parts, and that subsystems are related to each
other and to the whole. Basically, A system just like a human body is set of inter-related and inter-
dependent parts arranged in a manner that produces a unified whole. In order words, it is a collection
of men, machines and methods organised to achieve a set of functions.

Rather than dealing separately with separate departments of a business, the system approach to
management views the organisation as a unified, purposeful system composed of interrelated parts.
This approach gives management a way of looking at the organisation as a whole and as a part of the
larger external environment. In the systems approach, attention is paid towards the overall
effectiveness of the system rather than the effectiveness of the sub-systems.

Types of Systems

Basically, systems can be open or closed systems.

1. Open systems: a system that interact with its environment. It is also called a social system. An
organisation is a dynamic system as it is responsive to its environment. Organisations that operate as
open systems thrive (succeed) because they are open to opportunities from their environment.
2. Closed system: A system that does not interact with its environment. Organisations that operate as
closed systems struggle to survive because they resist change and so are not open to opportunities

Key Concepts of the System Approach

- Subsystems: those parts that make up the whole system e.g. production, marketing, sales, etc.

- Synergy: the situation in which the whole is greater than the sum of its parts. In organisational terms,
synergy means that departments that interact cooperatively are more productive than they would be if
they operated in isolation e.g. 2+2=5. therefore, if different aspects or functions of an organisation are
functioning in harmony focused on the long term goals and mission of the organisation, productivity is

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more enhanced than if these function in isolation

- System Boundary: the boundary that separates each system from its environment. It is rigid in a
Closed System, flexible in an open system e.g. culture, structure, leadership, etc. Open systems
therefore have a flexible boundary or a loop which allows interaction between the system and the
environment while closed systems have a strict or rigid boundary with limited interaction with the
environment

- Flows: components such as information, material, and energy that enter and leave a system that is,
system inflows and outflows (input and output)

- Feedback: the part of system control which the results of action are returned to the individual
allowing work procedures to be analysed and corrected

- Entropy: the possibility for a system to decay or stop functioning effectively

- Deterministic system: a system whose future behaviour can be predicted or predetermined

- Probabilistic system: a system control by chance and whose future behaviour cannot be predicted

The external environment

Inputs Output
Capital The
Land transformation Goods and
Labour process services
Equipment

Feedback

Advantages of Systems Approach

1. It concentrates on end results rather than the means.

2. It provides an orderly and efficient plan of action.

3. It develops coordination of the specialized activities.

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4. It provides a good basis of control

5. It frees management from many daily details of operations management.

Disadvantages

• The approach does not recognize the differences in systems.

• Over-conceptual

Business Organization Structures

Managers often describe their organisation by drawing an organisation chart, mapping out its formal
structure. These structural charts define the ‘levels’ and roles in an organisation. They are important to
managers because they describe who is responsible for what. But formal structures matter in at least
two more ways. First, structural reporting lines shape patterns of communication and knowledge
exchange: people tend not to talk much to people much higher or lower in the hierarchy, or in different
parts of the organisation. Second, the kinds of structural positions at the top suggest the kinds of skills
required to move up the organisation

1. The entrepreneurial structure or line organization

It is a structure of a small business usually a start-up where there are a few employees controlled by
the entrepreneur or a few experts carrying out specialised functions and supervised by a top executive.
In this structure, there are direct lines of authority, linking superior and lower ranking employee/
subordinate directly.

The Managing Director

Production Marketing Financing Personnel

Employee

The
Entrepreneur

Employee
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Advantages of line relationship

- There are clear lines of authority

- The structure is simple and easy to understand
- Decision making is fast
- Clear division of work between various departments
- Fast communication
- There is flexibility

Disadvantages

- Slow decision making and implementation

- Tendency for bureaucracy
- Too much work load on the key staff or top executive
- Too much reliance of key staff

2. Functional Organisations

It is the most basic form of organisational structure used mostly by small organisations that offer a
small line of products. This is an organisational structure arranged into specialist groups or
departments, that is, there is a functional relationship with specialist departments performing a number
of functions in other departments e.g. the personnel manager is supervised by top management but he
performs a number of functions to other departments in recruitment, training, selection etc.

Functional authority gives the staff manager the clear right to instruct line managers

Advantages

- It reduces the need for coordination

- There is good supervision
- It gives room for division of labour

Disadvantages

- There is the possibility of conflict among the specialists

- There is dual authority
- Authority and responsibility overlaps

The Managing Director

Assistant to managing director

Production Financing Marketing Personnel

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Assistant Assistant
 3. Divisional structure

Also called a product/market structure, it is a method of organising that centres around the products
and services of an organisation or its geographical location areas. Divisionalisation often comes about
as an attempt to overcome the problems that functional structures have in dealing with the diversity.
Each division can respond to the specific requirements of its product/market strategy, using its own set
of functional departments.

4. The Matrix Organisation

This is a form of organisation where workers have two bosses or where subordinates are controlled by
two superiors, firstly by the departmental manager and secondly by the project head or the regional
manager. It is a structure which combines the product or market structure, the divisional structure and
or the geographic structure. Here, the project manager determines what to do and the functional
manager determines how to do it

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 Managing Director

Matrix Production Marketing Finance Personnel R&D

Manager Director Director Director Director Director

Manager Project
A

Manager Project
B

Manager Project
C

This structure is characterised by the following features

 Top management
 Matrix managers-functional head and product or project head
 Teams

Advantages

- There is flexibility
- There is effective use of specialist staff i.e. they are moved to where they are being needed
- There is a network of teams to achieve specific objectives
- There is effective knowledge management that is, teams are made up of specialists
- There is bound to be cooperation
- It reduces the work load of top management in planning as work is carried out as projects

Disadvantages

- It requires high interpersonal skills

- There is the possibility of power struggle
- It makes control difficult
- Dual management has a high administrative cost
- There is the possibility for confusion since there is dual authority
- It is risky
- It leads to duplication of office work
- Decision making takes a longer period due to negotiations by managers on different aspects of
the job
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Decision Making

Managing means making decisions, this means that it is the task of every manager to plan for the
future before taking action this means decision making is the product of planning. As noted by
Mintzberg in his managerial roles, mangers make difficult decisions as resource allocators,
entrepreneurs, disturbance handlers and as negotiators.

Definition: Decision Making is the process of identifying and selecting a course of action from a
series of alternative courses to solve a specific problem. This means that a decision is taken in order to
solve a particular problem. A Problem here refers to situations that occur when an actual state of affair
(situation) differs from the desired state of affair (situation) this means that problems call for decisions
which call for planning

According to William Pounds there are four main situations that usually alert managers to possible
problems he called this The Problem Finding Process. They include;

 The performance of competitors: that is when other companies (competitors) develop new
processes, improve than our own company then it means something is wrong and that thing is
the problem
 A deviation from a set of plans: every manager plans and controls to meet the plans but when
the managers expectations are not being met and things are not going as anticipated for
example profits are lower than anticipated, a department is exceeding its budget, etc, such
events tell the manager that something is wrong somewhere requiring something to be done.
 A deviation from past experience: that is an organisation cannot longer meet is previous
pattern of performance for example sales of this year are less than those of last year, profits are
less than those of last year, increase employee turnover, etc. It is a signal that a problem has
developed.
 When other people report to the manager: that is apart from the subordinates of a manager
when other people such as customers, suppliers, hierarchy complains of high employee
turnover in the managers department, etc. it gives the impression to the manager that there is a
problem

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Some thresholds (starting point) to problem recognition

When there is a problem is an organisation managers do not just go ahead in search for a solution to a
problem they don’t even know, the first step is they try to recognise, to find out, to know what is
wrong in the first place and get more information about the problem before trying to bring up a
solution. These therefore are those things that managers do in trying to figure out what is wrong

 Setting priorities: No manager can handle all the problems that arise in the course of business
with a single shot. It is therefore important that they grade these problems in terms or time
needed to solve the problem, the intensity of the problem, etc. By setting these priorities, it
helps the manager deal more effectively with the problem
 Might the problem resolve itself? This is because there are a whole number of problems
which might take the managers time and resources but if just ignored might resolve itself over
time. By setting a priority list is important because these minor problems are ignored since they
pose little threat and will then be dealt with if they become intensive
 Is it my decision to make? a manager at any given time should always know the decisions that
are within his cost centre; That is, there are certain problems that may affect a manager’s job
but are not left to him to bring solutions since they are higher than his level in the business
structure; In essence what we are saying is that those closest to a particular problems are in the
best position to decide what to do about it.
 Is the problem easy to deal with? A manager who gives the same level of attention to every
problem is inefficient. Most problems however require only a small amount of the manager’s
attention. That is a manager should devote more time and resources just in problems that are
difficult to deal with

In this light we have two broad decisions which are programmed and non-programmed decisions

Programmed decisions: are decisions to routine problems; that is, problems that occur on a day to
day basis. In this case, a stated solution or decisions (policies, rules and procedures etc.) is then
programmed to help deal with them each time they occur without necessarily pushing them up the
management ladder e.g. Late coming

Non programmed decisions: are decisions which deal with unusual or exceptional problems. That is,
specific solutions created through an unstructured process of deal with non-routine problems. This is

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to say, problems that do not occur on a routine basis and cannot be solved by rules and procedures but
require special treatment must be handled by non-programmed decisions

THE RATIONAL DECISION MAKING PROCESS

There are four main steps in decision making as follows

1. Investigate the situation: that is, at this stage, the problem is defined, every detail cause of the
situation brought to the light of the manager, after which these different causes are diagnosed
that is by looking at those factors be it from inside or outside the organisation that might have
caused the problem and each of these causes are brought forth, after this is done, decision
objectives are then identified on what possible solution can be used to solve the problem
2. Development of alternatives: at this stage after the problem must have been identified and
every detail of the problem, alternative or different ways of solving the problem are now
established or developed. To avoid the temptation of always trying to accept the first
alternative which is a barrier to getting the best solution to the problem, managers often turn to
individuals and groups for brainstorming (a problem solving and decision making technique
where individuals and groups come together to cooperatively bring up alternatives to solve a
particular problem)
3. Evaluation of alternatives and selection of the best one: Once mangers have developed a set
of alternatives, they must evaluate each one on the basis of three key elements as; is the
alternative feasible? That is, does the organisation have the resources and money to carry out
this alternative? Will this alternative provide a satisfactory solution? And what are the possible
consequences for the rest of the organisation.
4. Implementation and monitoring of decisions: once the best available alternatives have been
selected from the series of different alternative developed, the decision is then put to affect that
is by giving orders and allocating resources and assigning responsibilities as necessary. Since
decision making is a continual process, managers must monitor these decisions to avoid
adverse consequences which may occur and correct these deviations. This is because, a job not
well done was not done at all

Levels of Decision Making

In modern organisations, decisions are taken at the Corporate level, tactical level and operational level

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Corporate level decisions: these are decisions taken by top level or executive management for the
entire organisation and usually focused on the long term performance of the organisation. They are
therefore long term decisions taken by executive management on how to achieve the organisation's
long term goals such as the vision, new market penetration, new product development, etc.

Tactical level decisions: these are decisions taken by middle line or junior management as an
interpretation of the corporate level decisions. For example, a corporate decision may be to penetrate a
new market, and then a tactical decision is how to successfully compete with other firms within that
new market

Operational level decisions: these are decisions taken by bottom or operational or supervisory
management concerning the day to day management of the enterprise. They are the implementation of
the corporate and tactical decisions For example, the recruitment of salesmen for a promotional
campaign.

Strategic Analysis in a Business

Strategies are the means by which long-term goals of a business will be achieved. According to
Mintzberg (1988), understanding how strategy can be viewed as a plan, as a ploy, as a position, as a
pattern, and as a perspective. James Stoner et al (1995) puts it as a set of managerial decisions and
actions that determine the long run performance of an organisation. It includes formulating,
analysing and implementing strategic plan

Increasing globalisation has rendered market highly competitive and so pure monopolies no longer
exist. For this reason and more, firms have to scramble for market share by developing plans, patterns,
ploys, perspectives or taking positions that will give them an edge over competitors. This is known as
competitive advantage. Michael Porter (1995) defines it as anything that gives a firm an advantages
over its competitors in the market for goods and services. According to him, a firm should undertake a
competitive strategy inorder to have competitive advantage.

Types or levels of strategy

There are so many strategies a firm may undertake Johnson and Scholes classified them into
corporate, business and operational or functional level strategies.
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Corporate Level Strategy

It is a strategy formulated by top management to oversee the interests and operations of an

organisation involved in more than one line of business. It refers to the overarching (dominant or
central) strategy of the diversified firm. For example, the decision of Guarantee Express Company Ltd
to allow the travelling agency business and concentrate on soap manufacturing will be a top
management decision since it will determine the future of that corporation. Examples of corporate
levels strategies will be expansion strategies, retrenchment strategies, growth strategies, etc.

Business or Strategic or Divisional Level Strategy

It is a strategy concerned with how to compete effectively within a particular market. It refers to the
aggregated strategies of single business firm or a Strategic Business Unit (SBU) in a diversified
corporation. That is it focuses on the individual products or markets of the firm e.g. on how to compete
in a particular market According to Michael Porter, a firm must formulate a business strategy that
incorporates either cost leadership, differentiation, or focus to achieve a sustainable competitive
advantage and long-term success. At the business level, the strategy formulation phase deals with:

 Positioning the business against rivals

 Anticipating changes in demand and technologies and adjusting the strategy to accommodate
them
 Influencing the nature of competition through strategic actions such as vertical integration and
through political actions such as lobbying.

Functional or Operational Level Strategies

This is concerned with how different functions in an organisation contribute to the corporate or
competitive strategy, that is when each functional department attempts to do its part in meeting overall
corporate objectives, and hence to some extent their strategies are derived from broader corporate
strategies Include marketing strategies, new product development strategies, human resource
strategies, financial strategies

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STRATEGIC ANALYSIS

Strategic Analysis is the process of reviewing or appraising the feasibility of a strategic. That is, it
takes into consideration the strengths, weaknesses, opportunities and threats presented by a company’s
environment (both internal and external) in light with their choice of strategy in order to know which
is more feasible to undertake. This analysis is done by analysing the factors of the internal, industry
and external environments of the company to determine its strengths, weaknesses, opportunities and
threats.

A scan of the internal and external macro-environment in which the firm operates can be expressed in
terms of the following factors:

THE INTERNAL ENVIRONMENT

Also called the controllable environment, it refers to those factors within a business which influences
its strategy and success potentials such as;

 The mission and vision statement

 The structure of the business
 The culture of the business
 The financial resources of the business
 Employees or human resources of the business
 System employed
 Etc.

This analysis is done to determine the strengths and weaknesses of the business in light of choosing
which strategy is most effective.

THE EXTERNAL ENVIRONMENT

Also called the uncontrollable environment, it refers to those variables outside an organisation capable
of influencing its strategy and success potential. This environment is sub divided into the micro and
macro external environment.

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The micro environment also called the industry environment, it refers to those variables affecting all
firms within a particular industry. This implies that, the micro environment of organisations will vary
depending on the industry in which they operate. These variables include;

 Customers
 Suppliers
 Competitors
 Investors (shareholders)
 Distributors or intermediaries

The macro environment also called the mega environment refers to those variables which affect all
firms irrespective of industry. They are therefore global factors which affect all firms operating within
a particular country or region. These factors include

 Political factors
 Economic factors
 Social factors
 Technological factors
 Ecological (Natural) factors
 Legal factors

The acronym PESTEL (or sometimes rearranged as "STEPLE") is used to describe a framework for
the analysis of these macro environmental factors. A PEST analysis fits into an overall environmental
scan as shown in the following diagram:

Political Factors

It refers to the general political environment of a country in which the business is operating. This will
vary depending on the scope of operation of the company for example; the environment of a local
business will be less complicated than that of a multinational or global business. Political factors
include government regulations as well general political climate and legal issues and define both
formal and informal rules under which the firm must operate. Some examples include:

 Regime of government
 General political climate of the country
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  Government policy and regulations
 Trade Restrictions And Tariffs

Economic Factors

Economic factors affect the purchasing power of potential customers and the firm's cost of capital. The
following are examples of factors in the macro economy:

 Economic growth
 Interest rates
 Exchange rates
 Inflation rate
 Trade cycle
 Level of employment

Social Factors

Social factors include the demographic and cultural aspects of the external macro environmentmay
affect the type of products being produced or sold, the markets they are sold in, the price at which they
are sold and a range of other variables. These factors affect customer needs and the size of potential
markets. The culture of an organisation is affected by the culture of the society in which it operates.
Changes in lifestyles affect the market and thus the running of an organisation, not only employee
practices, but the nature of products and services demanded. Social mobility, Some social factors
include:

 Population Growth Rate

 Age Distribution
 Career Attitudes
 Literacy level
 Life expectancy
 Level of education
 Social mobility
 Family size

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Technological Factors

This refers to economic advancement as a result of industrial research and development as well as the
speed at technology advances and governments expenditure on technology within a particular
economy. Technological factors can lower barriers to entry, reduce minimum efficient production
levels, and influence outsourcing decisions. Some technological factors include:

 R&D activity
 Automation
 Technology incentives
 Rate of technological change

The ecological environment

This refers to the natural environmental factors of the country including government policies regarding
environmental protection and conservation. It also include factors such as
 Topography
 Climate change
 Natural disasters
 Environmental pollution
 Natural resources
The legal environment
Businesses operate within a framework of law which has a significant impact on various aspects of
their existence. Laws usually govern, among other things, the status of the organization, its
relationship with its customers and suppliers and certain internal procedures and activities. They may
also influence market structures and behavior. Since laws emanate from government (including
supranational governments) and from the judgments of the courts, some understanding of the relevant
institutions and processes is desirable

External Opportunities and Threats

The PEST factors combined with external micro environmental factors can be classified as
opportunities and threats in a SWOT analysis.

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SWOT Analysis

A scan of the internal and external environment is an important part of the strategic planning process.
Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses
(W), and those external to the firm can be classified as opportunities (O) or threats (T). Such an
analysis of the strategic environment is referred to as a SWOT analysis.

The SWOT analysis provides information that is helpful in matching the firm's resources and
capabilities to the competitive environment in which it operates. As such, it helps in strategic
appraisal. it is instrumental in strategy formulation and selection. The following diagram shows how a
SWOT analysis fits into an environmental scan:

Strengths

A firm's strengths are its resources and capabilities that can be used as a basis for developing a
competitive advantage. Internal strengths and internal weaknesses are an organization’s controllable
activities that are performed especially well or poorly. They arise in the management, marketing,
finance/accounting, production/operations, research and development, and management information
systems activities of a business. Identifying and evaluating organizational strengths and weaknesses in
the functional areas of a business is an essential strategic management activity. Organizations strive to
pursue strategies that capitalize on internal strengths and eliminate internal weaknesses. Strengths and
weaknesses are determined relative to competitors. Relative deficiency or superiority is important
information. Also, strengths and weaknesses can be determined by elements of being rather than
performance. For example, strength may involve ownership of natural resources or a historic
reputation for quality. Strengths and weaknesses may be determined relative to a firm’s own
objectives. For example, high levels of inventory turnover may not be strength to a firm that seeks
never to stock-out. Examples of such strengths include:

 Patents
 Good mission statement and strategy
 Motivated, competent and performing employees
 Strong brand names
 Stable and loyal suppliers

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  Good reputation among customers (loyal customers)
 Quality and performing products
 Exclusive access to high grade natural resources
 Favourable access to distribution networks

Weaknesses

The absence of certain strengths may be viewed as a weakness. For example, each of the following
may be considered weaknesses:

 Lack of patent protection

 A weak brand name
 Low sales
 High employee turnover
 Poor reputation among customers
 High cost structure
 Lack of access to the best natural resources
 Lack of access to key distribution channels

In some cases, a weakness may be the flip side of strength. Take the case in which a firm has a large
amount of manufacturing capacity. While this capacity may be considered a strength that competitors
do not share, it also may be a considered a weakness if the large investment in manufacturing capacity
prevents the firm from reacting quickly to changes in the strategic environment.

Opportunities

The external environmental analysis may reveal certain new opportunities for profit and growth. Some
examples of such opportunities include:

 An unfulfilled customer need

 Arrival of new technologies
 Loosening of regulations
 Removal of international trade barriers
 Favourable interest rates
 Favourable exchange rates
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  High income levels
 Available cheap labour
 High population growth rate

Threats

Changes in the external environmental also may present threats to the firm. Some examples of such
threats include:

 Change in customers taste and fashion

 Emergence of substitute products
 Increased trade barriers
 Unfavourable exchange rate
 Unfavourable interest rates
 Increase in government regulations
 Unfavourable government policies

The SWOT Matrix

A firm should not necessarily pursue the more lucrative opportunities. Rather, it may have a better
chance at developing a competitive advantage by identifying a fit between the firm's strengths and
upcoming opportunities. In some cases, the firm can overcome a weakness in order to prepare itself to
pursue a compelling opportunity.

To develop strategies that take into account the SWOT profile, a matrix of these factors can be
constructed. The SWOT matrix (also known as a TOWS Matrix) is shown below:

SWOT / TOWS Matrix

Strengths Weaknesses

Opportunities S-O strategies W-O strategies

S-T strategies W-T strategies

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 Threats

 S-O strategies pursue opportunities that are a good fit to the company's strengths.
 W-O strategies overcome weaknesses to pursue opportunities.
 S-T strategies identify ways that the firm can use its strengths to reduce its vulnerability to
external threats.
 W-T strategies establish a defensive plan to prevent the firm's weaknesses from making it
highly susceptible to external threats.

In this case, for a company to determine which effective strategy to choose, management must convert
weaknesses into strengths and take advantage of opportunities to minimise threats. That is;

W=S

T=O

S + O + Suitable strategy or action plan

STRATEGY FORMULATION

That is, of asking the question, “What is our business?” This leads to the setting of
objectives, the development of strategies, and the making of today’s decisions for
tomorrow’s results. This clearly must be done by a part of the organization that can see
the entire business; that can balance objectives and the needs of today against the needs of
tomorrow; and that can allocate resources of men and money to key results. 2 Peter F.
Drucker

Given the information from the environmental scan, the firm should match its strengths to the
opportunities that it has identified, while addressing its weaknesses and external threats. In the choice
of strategy, firms have to choose from corporate, business and operational levels

According to Michael Porter, to attain superior profitability, the firm seeks to develop a competitive
advantage (something a firm has or can do that competitors have not or cannot) over its rivals. To him,
a competitive advantage can be based on cost or differentiation or segmentation. Michael Porter
identified three industry-independent generic strategies from which the firm can choose.

a. A Cost-Based Approach or Overall Cost Leadership Approach:

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With this strategy, The Company aims to produce in large quantities, at the lowest cost possible and
sell at lower prices than the competition. By doing this it can capitalise on economies of scale and
defeat any competitor who has not got equal production capacity, or who cant keep prices to a
minimum. This strategy will also attract price-sensitive buyers away from the competition. Using this
strategy, it therefore concentrates on mass production, building of large manufacturing factories,
machines, etc.
b. A Differentiation Approach:
This strategy involves offering some unique selling (or service) proposition (USP) that the competitors
do not have. Prices may not be too important to buyers since they prefer a product of a superior
quality mindless of the price, therefore products sold under this strategy follows that customers
become brand or product loyal, they therefore improve on aspects of a product such as colour, size,
package, different products depending on different segments e.g. children, adults, etc. The firm will
therefore concentrate on offering a product with a superior quality than its competitors. When firms
position themselves through unique goods and services customers value, business often thrives. But
when firms try to please everyone, they often find themselves without the competitive positioning
needed for long-term success.
c. A Focus (or Niche) or Segmentation Approach.
With this strategy, The company can concentrate on its key products for specific targets or on specific
market segments to acquire a reputation for being "specialist", or can simply attack concentrate on
segments and sectors of the market which are being ignored by the competition. In this case an
organization would produce items for a niche market, as opposed to a mass market. By concentrating,
it helps them cut down their cost and also to serve customers better

There a large number of strategies a company may use ranging from product and market strategies
to manufacturing strategies. Such as, the product life cycle, the product portfolio analysis (BCG
matrix), product positioning, value chain analysis, Ansoff’s product/market growth matrix, Just in
time manufacturing, benchmarking, balanced scorecard, etc.

STRATEGIC IMPLEMENTATION

According to William Joyce, there are four different approaches to strategy implementation each
depending on the size of the problem and the time available to solve the problem

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  Evolutionary intervention: this takes place when an organisation’s problems are small and
posing relatively little pressure to solve them. These interventions involve the manager’s daily
decisions in respond to a problem at hand or in an attempt to improve performance (long time)
 Managerial intervention: this is needed in cases where there are minor problems but which
need immediate attention
 Sequential intervention: this is needed in cases where there are serious problems affecting
more than one area in the organisation this therefore demand planned intervention as the
manager will have to sub divide the problem and tackle each part sequentially until the whole
problem is solved
 Complex intervention: this is a situation where there is a serious problem but there is no time
to plan for intervention and the manager is forced to deal with it immediately

Human Resources Management

This is the management function which deals with the recruitment, placement, training and
development of an organisation’s members Human resource management (HRM or simply HR) is
the management of an organization's workforce, or human resources. It is said to be that function in an
organisation that ensure it is constantly and adequately equiped with skilled employees

Characteristics of Human Resource Management

According to Scott, Clothier and Spriegal, ―The objectives of Human Resource Management, in an
organisation, is to obtain maximum individual development, desirable working relationships between
employers and employees and employees and employees, and to affect the moulding of human
resources as contrasted with physical resources.

The basic objective of human resource management is to contribute to the realisation of the
organisational goals. However, the specific objectives of human resource management are as follows:

 To ensure that the organisation is constantly and continuously equipped with skilled employees
To ensure effective utilisation of human resources
To identify and match the HR strategy with the long term goals of the organisation
 To generate maximum development of human resources within the organisation by offering
opportunities for advancement to employees through training and education
 To ensure respect for human beings by providing various services and welfare facilities to the
personnel

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  To ensure reconciliation of individual/group goals with those of the organisation in such a
manner that the personnel feel a sense of commitment and loyalty towards it.
 To identify and satisfy the needs of individuals by offering various monetary and non-
monetary rewards.

The Importance of HRM

According to Peter F. Drucker, The proper or improper use of the different factors of production
depends on the wishes of the human resources. Hence, besides other resources human resources need
more development. Human resources can increase cooperation but it needs proper and efficient
management to guide it. In summary, HRM is important to an organisation in the following ways.

 It helps management in the preparation adoption and continuing evolution of personnel

programmes and policies. It supplies skilled workers through scientific selection process.
 It ensures maximum benefit out of the expenditure on training and development and
appreciates the human assets.
 It prepares workers according to the changing needs of industry and environment.
 It motivates workers and upgrades them so as to enable them to accomplish the organisation
goals.
 Through innovation and experimentation in the fields of personnel, it helps in reducing casts
and helps in increasing productivity.
 It contributes a lot in restoring the industrial harmony and healthy employer-employee
relations.
 It establishes mechanism for the administration of personnel services that are delegated to the
personnel department.

The Human Resource Process

The human resource management process is an on-going process that tries to keep the organisation
equipped with the right people in the right positions, at the right time and cost. This process follows a
continuous cycle beginning with the identification of the human resource needs of the organisation in
light with its longterm plan to the transfer, layoff, retirement or dismissal of the employ. The complex
chain of activities can be basically summarised into the following;

 The Human Resource Planning: is a process that identifies current and future human
resources needs for an organization to achieve its goals. That is planning for the future
personnel needs of an organisation, taking into consideration both internal activities and factors
in the external environment. It is designed to ensure that the personnel needs will be constantly
and appropriately met it is done through the analysis of internal factors such as vacancies,

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 expected skills needed, departmental expansion etc. and external factors of the environment
such as the supply of labour by the labour market,

 Recruitment: refers to the process of attracting, screening, and selecting a qualified person for
a job. In other words, it is the in movement from outside the organisation to grade within the
organisation or developing a pool of candidates according to the organisation’s human resource
plan. They are located via newspapers, employee agencies, words of mouth, and visit to
colleges or universities
 Selection: that is evaluation and choosing among job candidates. It involves using application
forms, resumes, interviews and reference checks to evaluate and screen job candidates for
placement by taking those qualified from the pool of candidates developed through recruitment
 Training and development: Training programs are aimed at increasing the skills and
performance of workers in the present job while development programs are designed to
increase the skills and performance of workers in their present jobs while preparing them for
future responsibilities. I.e. it prepares employees for promotion
 Remuneration or compensation: it is the financial reward employees receive for the work
done. This function manages the payroll by determining employees’ monthly wages and
salaries for work done.
 Performance appraisal: Performance appraisal (PA) or Performance Evaluation is a
systematic and periodic process that assesses an individual employee’s job performance and
productivity in relation to certain pre-established criteria and organizational objectives; that is
comparing and individual’s performance against standards developed for that individual’s
position. If high, the individual be merited and if low, the individual becomes a candidate for
training
 Health and safety: this function ensures that employees are physically and mentally healthy to
perform their function. It therefore assures the wellbeing of employees at their job place. It
takes into consideration health and safety policies, stress management, industrial accidents, etc.
 Promotion, demotion, transfers, layoffs or dismissal

The Company, the Society and Culture

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References

- Peter F. Drucker (1986), MANAGEMENT Tasks, Responsibilities, Practices, 1st Edition,

Fitzhenry & Whiteside Ltd
- Peter F. Drucker (2008), Management, Revised Edition, HarperCollins
- James Stoner, Edward Freeman, Daniel R. Gilbert(1995), Management, 6th Edition, Prentice-
Hall International p. 239
- Fred R. David, (2011), Strategic Management, 13th Edition, Prentice Hall p. 49,
- Sandra Cunliffe (2017), ‘Managing Stakeholders Relationships’ www.abeuk.com
- Philip Kotler and Gary Armstrong, (2010), Principles of Marketing, 13th Edition Pearson
Education Inc p. 37, p. 135;
- Marilyn A. Stone and John Desmond, (2007), Fundamentals of Marketing, 1st Edition,
Routledge p. 11
- Philip Kotler and Kelvin L. Keller, (2012) Marketing Management, 14th Edition, Prentice Hall
p. 20, 257, 478

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