PRINCIPLES OF MANAGEMENT

PRINCIPLES OF MANAGEMENT

Benon Kajibwami

Contents

Definition4

Business process8

Management structure10

Management culture11

Relationship between business planning and operations11

Effective communication between managers12

Different responsibilities13

Strategy13

PRINCIPLES OF MANAGEMENT

Analysing the positive and negative aspects the of five market entry strategies that could be utilised by an international business during the implementation of a global strategy.

The 20th century saw a huge rise in international trade and the emergence of a more open world economy. Industries emerged in many developing countries, business opportunities expanded across the continents. New technological advancements created a race for competition among developing and developed economies. The internet age ushered in globalisation at its best. By the dawn of the 20th century, emerging world economies like China, Brazil and India created a market brimful of competition and better ways of maximising profits at reduced costs.

The globalisation of consumer tastes and the expansion of internet access globally increased the accessibility and interdependency of nation economies across the globe. Business managers across the globe are recognising the necessity for organisations to develop the right skills, technology and knowledge to favourably compete in the international markets. In this course work, it would be of paramount importance to understand and define key words before delving into the analysis of the positive and negative aspects of the five market entry strategies that could be utilised by an international business during the implementation of a global strategy. The meaning of Market entry strategy, Business strategy, Internationalization strategy, and global strategy will be explained. The five market entry strategies and its positive and negative aspects will be equally dealt with in the course of the assignment.

Terms and definitions associated with market entry strategy. Market strategy refers to planned methods that businesses or organisations use to deliver their products and goods in new markets. It is a plan developed by a company to enter a new market or sub-market (Litter/Wilson 1995 p.50).

Business strategy specifies the resources and offers that are needed for each business in order to achieve or protect the target market positions as stated in the corporate strategy. It identifies the competitive advantages at the level of market offers and resources, which are to be built up or maintained.  

Internationalization strategy is the process of adapting exchange transaction modality to international markets. (Andersen 1997).This definition included both entry mode strategy and international market selection.

Global strategy as defined by Porter, is one ‘’One in which a firm seeks to gain competitive advantage from its international presence through either a concentrated configuration, coordination among dispersed activities or both’’ (Porter, 1986, p.29). He further defines global strategy as an attempt by a company to sell ‘’its product in many nations and employs an integrated worldwide approach to doing so’’ (Porter, 1990, p.54).

Global operations strategy gives the framework for a market entry strategy. The market entry strategy can be said to give overall plan to enter a new market, and the components that must be considered to reach this objectives.

The main purpose of strategic management is to provide or ensure long term success to companies. The long term success of a company lies in achieving its goals and objectives. A company can accomplish this task in the long term by the construction and careful maintenance of success potentials.

As a group we shall complete the above assignment by beginning with identifying the five market entry strategies that a global organisation may use in order to gain entry into a market

1. Exporting

2. Franchising

3. Joint venture

4. Acquisition

5. Licensing

Definition

Definition for each of the five market entry strategies chosen are,

1. Exporting: This is the sending of products or services with easy from one country to another, and ‘the local based competition aspects are enough to minimise reliance on local business (Johnson G, Whittington R and Scholes. k. 2011:284).

Exporting can further be the initial market entry for medium scale businesses, it offers immediate access and provides knowledgeable advice on services or products as it involves having an agent locally. (Coade, N.1997:38).

Indirect Exporting; according to the business dictionary, it is given as the use of a third party based in the market place to cater for the exports meaning exports are not in the exports care directly.(business dictionary 2013)

Direct exporting: Herbert Galignon and Erin Anderson, states that an organisation will generally have set up its own export company and will rely on a third party based in the foreign market.

(Herbert Galignon and Erin Anderson1998)

2. Franchising: franchising has been on the rise since the 1980’s it provides for high growth and quick market entry for companies mostly connected to the consumer sectors of an economy, it can be used to gain local knowledge, and has attracted companies such as marks and Spenser, which were traditionally not known in this market entry, the most notable companies that were traditionally known were McDonald and Hertz car rental (Coade 1999:410).

3. Joint venture: these are suitable where narrow advantages of competition locally and where ‘local licensees or joint venture cannot be trusted with intellectual property’ again joint venture can be where owners giving a foreign organisation more power to enable both partners maximise the common enterprise (value)

(Johnson.s. Whittingdon.r. Scholes.k 2011: 284)

4. Acquisition;

This deals with taking control of another business (entrepreneur 2013). Acquisition is further provided by the (duhaime legal dictionary 2013), and it is defined as taking responsibility of records, possessions and other company assets or share.

5. Licensing: this is mostly a market entry for consumer goods and benefits organisations in previously inaccessible markets. This entry mode offers less investment risk and low resources are required. Another positive aspect of licensing is that it provides easy monitoring of the trends of products and services through the already available distribution set up of the licensee, this meaning that the product or service will access the market at a fast pace. The main disadvantage is the creation of competition (Coade 199:40-41).

Global Market entry strategies

The 5 market entry strategies chosen

Positive aspect

Negative aspect

1. Exporting

- the resources needed are minimum

- the risks are low

-the control of exports by the company is increased in terms of direct exporting

-the company can increase sells

-The control is less or minimum

-The exporting company may lack a contract within the market, thus in terms of direct exporting this can be avoided

-accessing the market or gaining knowledge in the foreign marke5t is not attained

-Future opportunities can be missed meaning the need of setting up own export company

-The input of resources is high

2. Franchising

-The franchisor investment is minimum

-Entry in the market can be instant

-Commitment to venture is increased

-need for quality control

-Lack of control

- risk of creating competitors

3. Joint venture

-Provides a balanced commitment in sharing losses

-Joint ventures may have minimum resources required compared to wholly owned

-Potential of synergies.eg access to local distribution network

-Risk of conflict with partner

-Lack of control

-Risk of creating competitor

4. Acquisition

-Full control

-Access to local assets, i.e. access to local distribution networks

-Less competition

-Costly

-High risk

-Need to integrate national / corporate cultures

-Cultural clashes

5.Licensing

-little or no investment

-Rapid way to gain entry

-Means to bridge import barriers

-Low risk

-Lack of control

-potential opportunity lost

-need of quality control

-Risk of creating competitors limits market development

Global organisations.

Briefly we shall discuss a global organisation; most global organisations will provide a formation of a clear vision, mission and strategy as guidance to perform the project. The consistence of the strategy allows the management to remain focused and not end at the strategy process/ objectives, but also see the fulfilment of these objectives.

By examining an organisation such as REXMAN, a global company that is a leader in providing cans for major drinks companies such as Coca-cola, Red bull, Heineken and Budweiser

The (Evening standard newspaper), reported that the business of REXMAN is a company that has a global empire estimated at £ 4 billion, the company is mainly involved in the tin and can making industry and can produce up to 60 billion drinks cans a year from the 55 factories that it operates, this gives it a large share in the world, thus its brand name is not well known as the other companies it supplies, the company sold divisions in its group and reduced it debt to £800 million, this was due to its strategy of geared towards markets in Brazil in anticipation for next year’s football world cup and the 2016 Olympic to be held in the same city, such events are seen to increase consumption globally. As the future planed anticipation the company had invested £100 million in a new plant in Switzerland and this is located close to the Red bull factory base. Again this is seen as a strategic move as red bull is one of the company’s clients. Rexman has also increased interest in new markets in the sub Saharan Africa and the Middle East; it has relocated the company’s division of emerging markets closer to these markets from Luton to Dubai, meaning this will provide the company access to these new markets. In conclusion this review shows how globally companies can plan ahead to again entry in new markets as well as investing for the long term.

(Evening standard newspaper business 2013)

Business process

For any organisation to have the capacity to deliver services or products to customers, business processes in essential the processes are capable of bring together the operations of an organisation and are the links or means used by organisations with it supplier, Partner, distribution Channel, Product and services, People (personnel), and other stake holders. Further explains that the existence of organisations requires them to supply customers with services and products and that it is processes that make it possible to achieve these goals.

(Jeston,j and Neils, j 2008:4).

Organisational structures.

The organisation

External influences

And globalisation 3

International management styles 4

Management practices 5

Defining the corporation 6

Principles of management

Foundation

1

Principles 2

The global environment

Local environment

Share holders

The graph above represents an organisation structure, showing the foundation of the organisation, principles of the organisation, external influences and management styles, and clearly shows what defines the organisation from other organisations

(Tony Morden 1993)

Management structure

Various forms of management structure and their relevance to size and technology can be based on

a. Total asset of the company

b. Income

c. Number of employees

d. Nature of business and environment

e. Political or social

Board of directors

Managing director and chief executive

Corporate planning director

Human resources director

Production director

Marketing director

Finance director

Information systems manager

Factory manager

Planning and training managers

Marketing manager

Accounts and finance manager

Sales manager

This Management structure enables staff to specialize and be accountable for specific activities.

(Tim Hannagan 2005:16)

Technology

According to Tony Morden, Technology can have an impact on the organisation, where it is responsible in aiding work flow or communication with team members; this can be in the form of assigning email, which can be helpful to the organisation in terms of monitoring work load. This part of technology in global organisation ‘is almost 80%’ furthermore, he states that this makes work easier for staff to understand or be trained and that the most obvious disadvantage is that jobs can be lost due to emerging technologies. In summary technology plays a big role in providing organisations the necessary tools and that it is capable enough to enable staff in their daily duties.

(Tony Morden 1993:12)

Management culture

Tim hannagan, defined management culture as ‘the way we do things around here’ this can be seen as a complicated mixture of factors, which can be in general about how people behave in an organisation. Organisations can show their culture through a variety of systems in place such as

Recruitment

Induction

Reward system

Promotions policy

Leadership

Training and development

(Tim hannagan2005:23)

Relationship between business planning and operations

The strategic and business planning process is the management planning for the short or long term and can be between 2-5 years, and this process has a number of elements that include forecasting. ‘Forecasting and planning are interlinked’ meaning that any organisation without forecasting cannot plan ahead. Planning is required in order to overseas the success or failure of any organisation. There are severe factors that may influence planning these can be competition, legislation, price fluctuation and the environment. (Tony morden1993:54)

Tim hannagan states that during the 1980’s ‘BA customer service campaign was designed to change behaviour of the employees’ such as putting the customer first. This was created to have changes in behaviour of the staff. (Tim hannagan2002:162-163)

Planning can also be to make sure that the organisation knows well its customers requirements, direction which the customer needs and the expectation in changes of how technology and the available competition is helpful to the customers they serve,

(Tim hannagan 2002, cited marquanett1999:164)

Effective communication between managers

In large global organisations, this is mostly through information technology, and can be used as a tool of communication between managers with various responsibilities; this can also assist in the monitoring of individuals and their performance, and empowers the organisation employees with the choice of making fast decisions through sharing information, It also makes it possible for people in the organisation to be contacted any time or any where they may be. Effective communication can be achieved by organisations having a networked system between managers, this allows the organisation members to communicate with each other at any time either through various Medias, such as texts messaging, voice mail or fax.

(Stephen, R and Mary coulter2012:444)

We have here below provided a pyramid chart showing the communication process in an organisation

Top managers

Middle manager

Manager

Organisation

This indicates that the organisation managers communicate with middle managers who in turn communicate with top manger and the process is again repeated from the top manager to the middle manger and then to the organisation mangers who in turn communicate to the organisation members

Different responsibilities

Managers are responsible for helping the organisations achieve objectives and for helping to put in place their plans and are responsible for planning, organising, leading and controlling the efforts of organisation members by using all resources available at their disposal to achieve the organisation’s strategy or goals.

(Tim hannagan 2002, cited meson et al; 1985:5)

Tim hananagan 2002 cited parker Follett that the above description is what managers do, while the skills of managers can be described as getting things done by other people (Tim hannagan 2002 cited parker Follett 1994).

Strategy

Senior managers

planning Innovation

and risk taking middle managers

Junior managers

Organising, supervising, controlling

(Tim Hannagan 2002:9)

The pyramid above shows the stages involved in an organisation to achieve its main strategy at the top of the organisation. The junior mangers are involved in organising, supervising and controlling. The middle mangers are responsible for planning, innovation and risk taking is encouraged. Senior managers are responsible for the organisation’s strategy.

This meaning that strategy is the most important aspect of any organisation.

Managers Responsibilities

The actual role and functions of managers in an organisation can be said to identify mangers from other members in the organisation, (Tim hannagan 2005).

The pyramid chart below show management levels and responsibilities

Senior mangers board, directors, chief executive, senior factory managers

Middle managers production mangers, sales managers, section managers

Junior managers supervisors, unit managers

Operations production workers, sales and services

employees

The pyramid above represents the different roles responsibilities and management levels of managers. It shows that the organisations operations are mostly undertaken by employees of the organisation such as production workers, sales staff. The supervisor roles are undertaken by junior mangers or unit managers, this is followed by middle manager whose role may be as production mangers or section managers, and finally the senior mangers whose role is mainly the strategy of the organisation, these can hold positions on the board as director, chief executive or senior managers

(Tim hannagan 2005: 15).

Corporate success

Tony Morden, states that the performance or success of any organisation can be termed as high performance organisation (HPO) this is because such high performance organisation are better than other organisations in terms of results over a long period of time by being able to adopt well to changes.

(Tony Morden 1993:12)

Conclusion

In conclusion, all the five market entry strategies can be said to have their strengths and weaknesses. They can be utilized when implementing the global strategy. In analysing the positive and negative aspects of the five market entry strategies, it is imperative to stress that there can be rewards which could be highly beneficial to the growth of the business as well as risks which may adversely affect the business.

There are pertinent questions to be raised when utilising the five entry market strategies. Questions like how much will be lost; if a chosen market strategy fails. How will it affect the structure of the company?

It should be emphasized that sometimes it is not automatic that a successful market entry strategy applied in one market will translate into another market when adopted. This means that there are various factors that may lead to a good market strategy in one market not suitable in another market. All the market strategies have their limitations as well as their strengths.

However, it is the decision of the company to weigh and evaluate the best strategy to employ in a global environment where competition is rife. Some of the pertinent questions to be considered include, how much the business is conducted in the sector and the target market, export experience of the company, amount of finances required, after sales services required to support the strategy, degree of control, level of resource commitment and entry options available.

We shall refer to Rexman a global company that offers products in the industry of tin/can manufacturing, see pg. 7. The most appropriate market entry strategies for this company would either be by joint venture or by acquisition- this is because the company is already an established global organisation and may have the resources to undertake an acquisition or a joint venture in a new market globally. This form of market entry can enable Rexman to gain access to market shares and have control of the acquisition or share in profits within the joint venture, thus this can be costly, in the case of an acquisition. And the advantage of synergies in the local market can be i.e. access to local network in the case of a joint venture.

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