BASIC CONCEPTS IN STRATEGIC MANAGEMENT
Functions of Objectives
1. Setting of objectives legitimizes the existence of a busines$s
2. Objectives provide 9guidelines for action, directing and channeling
3. It seves as constraints that limit excesses.
4. Objectives serve as ends that justify organisation business eforts.
5. It motivates and give employees drive to achieve resuits.
Lawal (1993) said to manage a business is to balance a variety of needs and interests..this requires a matured judgement.There is no way a single objective can achieve the goals and the needs of an enterprise. Drucker identified key areas in which objectives of an enterprise should be set. These areas include
Market share: Establishing objectives relating to competitors. Often stated in percentage or figure. Examples: Increasing market share from 25% to 40% within 5 years. Achieving a total sale of 20 million by the year, 2020.
Innovation: Innovation is the strength of newness. Recognising the tact that the continued existence of a company depends on its ability to generate and develop new ideas. Examples
To design a humanoid that will perform office functions within 10 years of operation.
To modify existing product by the year, 2020.
Productivity: Aiming at efficient and effective utilisation of resources to produce more goods and services with less cost. Examples:
To reduce waste by 5%, while increasing production by 10%.
Reducing overneads and sundry costs to reducing production cost per unit.
Financial Resources: To acquire enough funds to finance production or new innovation. Examples
Maintaining minimum of 2 billion working capital, Sourcing long-term funds at a cheaper cost (interest).
Human Resource: To activate managerial talents for present and future needs. Examples Establishing a training programme every year to improve the skills of managers. Organising in-house trainings for staff periodically.
Profitability: A minimum acceptable level of profit reasonable enough for return on investment. Examples: Increasing profit from 20% to 25% in 5 years.
Achieving return on investment of 15% yearly. Improving level of employee morale and cooperatio
Reducing labour tumover to 5%% by the year, 2020.
Social Responsibility: Obligation to discharge social responsibility by giving back to the society in which the entity is in operation. Examples
Awarding of at least 200 scholarships to indigent students of the communy Sponsoring youths programmes yearly.
A cursory look at the foregoing objectives will reveal three main components:
1. Action verb; example, to achieve
2. Performance specification; example, 15% returns on investment.
3 Time; example, yearly.
DECISION MAKING IN ORGANISATIONS
Management is often faced with the problem of choosing from alternative courses or action. The question why make. what to make how to make where to make, where to sell the product and at what price call for decision making Achieving the objective of these questions entrust management with the responsibility of mobilising scarce
organisational resources for economie gains.
Abhulimen (2012) defines decision-making as the process whereby the managemem
determines its goals or objectives and selects, among alternatives that which it believes will either procure the best outcome or attain the desired objective with the
most economical utilization of resources
Decision Making Process
For decisions to be consistent with a given objective, it must follow a systematic process. These processes are highlighted below:
Evaluation of the environment – Assessing internal and external environmental factors to understand the nature of the business is fundamental to the success of the business
Problem definition – If you do not know where you are going, you will arrive al any destination. In order to have a focused direction, the problem which decision must solve has to be properly defined
Generate alternatives and their probable consequences – There will often be more than one course of action open to an organisation for pursuing same objective. The decision maker has to identify and specify strategies that deliver
the desired objectives and their respective cost-benefit relationships
Selection of solution – After analysing various alternatives, the appropriate strategy is selected from among alternatives. Sometimes the best alternative
may not be the right alternative for selection
.Implementation – If a decision is not suitable feasible and acceptable to members, it will run short of its purpose. Decision must be compatible with organisation environment for it to solve the identified problem.
Strategies for Decision Making
Thompson and Tuden (1959) provided a contingency model of decision making whose main objective is to suggest which decision making strategies are best suited for each decision situation. The four strategies suggested by Thompson and Tuden are:
Computation strategy – This strategy relies upon calculation and related means to arrive at a decision. It is used in a situation where both ends and means of decision are certain
Judgement strategy – Is based upon past experience, tradition and other types of qualitative data. It is used in a situation where the ends are certain but the means are uncertain
Bargaining strategy – This strategy involves negotiation and horse trading between powerful coalition members and interests. It is used for decision situations that are characterised by uncertain ends and certain means
Inspiration strategy – This is the strategy required to solve a situation that is difficult to understand its nature and demands because such problems have not been encountered before Managers will have to rely on intuition to solve
such problems that seem to defy solution.
Decision Makers in Organisation
A common feature of decision-making is that it is taken at the top management level but the guiding principle is that decisions should be taken at the lowest competent level. As observed by Abhulimen (2012), this is determined by two main factors.
The possession of all relevant information and
The requisite competence and motivation to subject the available information toan objective consideration
Types of Decisions
Decision is classified into three broad categories including:
Administrative decisions and
Policy Decisions: Is a guide for making decisions which help to facilitate: consistency of decisions, delegation time and cost saving Policy may originate from the top management or imposed from outside the organisation or inferred from the consistent actions of staff even though it is not explicitly spelt out.
Adeleke et al (2005) examined the major sources of policies and classified them as
originated, appealed, implied and externally-imposed. These are explained as follows:
Originated Source – The most acclaimed source of policies is the one from top management which originates for the express purpose of guiding the company’s operations. Originated policies flow basically from the objectives of the enterprise, as they are defined by top executive authority. These types of policies may be broad in scope, allowing key subordinates to give them clearerdefinition or they might be promulgated so completely and comprehensively as to leave little roomfor definition or interpretation.
Appealed Source – In practice, in most cases, policies stem from appeal through the hierarchical level of management authority if occasion for decision arises for
executives who do not know whether they have sufficient authority or how such matters should be handled, they appeal to their supervisors for the necessary support and action. As appeals are taken upward and decisions are made on them, a kind of rules and procedures are established. Precedence, therefore develops and becomes guides for future managerial action and serves as reference point.
Implied Source – Useful policies are developed from the actions which employees see about them and believe to constitute them. Employees will readily understand what real policy is if they work for a company that operates policies that produce high quality goals, or sound labour policy, for instance, though the real policy is implied.
Externally-imposed Source – To a large extent policies are externally imposed by such agencies as the government, trade unions, professional associations and others like trade associations. This might come in form of direct regulation or one of the many conditions of accepting government aid or contract; it could also be to maintain industrial peace. Besides this, local and state governments, professional associations, social and charitable organisations do influence the policies of organisations
Administrative Decisions: Have to do with day-to-day operational activities of the organisation. Such activities include personnel management Job improvement, quality control, determination of production volume and product pricing. These decisions are concerned with procedures for achieving organisation objectives and often spelt out in circulars and procedure manuals
Executive Decisions: Are routine decisions taken on a day-to-day basis by the Individual manager or supervisor. Such decisions revolve around organisational policy for determination of the followings: the source of supply of input, staff training staff transfer, staff leave, allowances and so on. Although managerial duties occasionally
demands adoption of management by exception (MBE) technique, a situation where managers free themselves of day-to-day supervisory demands and concern
themselves only with non-routine problems, such as the consideration and application
It is good to note that decision making does not reside in an individual manager alone
All other times, subordinates are allowed input in goal setting for work performance. This process is known as
management by objectives (MBO)
Management by Objectives (MBO)
Management by objectives is a goal-setting process that involves managers and their subordinates jointly setting goals for work performance and personal development. The approach seeks to align employees’ objectives with the organisation’s goals. The system was developed by Peter Drucker in the 1950’s and has proved popular ever Since
Advantages of MBO
It helps team members clarify the job to be done and how it will benefit the whole organisation
It aids the implementation of strategy by involving the subordinates directly in setting of targets expected of them.
It motivates the subordinates through participation in decision-making.
It brings about objective and suitable performance appraisal by relating compensation and promotion directly to individual performance.
It enables the employees and managers to distinguish between tasks that are necessary and those that do not contribute to the organisation’s objective. It improves communication and relationships between the.managers and subordinates that enhance subordinates’ competence.
Disadvantages of MBO
Too much emphasis on short-term objectives at the expense of long-term objectives. MBO concentrates on what individuals can achieve at the moment
MBO is often challenging and lengthy to implement needing what can be perceived as an unnecessarily expensive underlying goal tracking system.
Inadequate management support and style. MBO reduces the extent of control exercised by top management, where top managers are autocratic, MBO may not work Poorly defined objectives. Service oriented organisations may find it difficult to define accurately their objectives and clearly defined goal is necessary for MBO
Implementing MBO requires commitment across the whole organisation Significant employee resistant can occur.
COMMUNICATION IN ORGANISATIONS
Communication is the act of transmitting messages to people in a manner to stimulate response (Lawal, 1993). It is typical to have two forms of communication in
organisations interpersonal communication and organisational communication,
The topic of communication is critical to strategic management in that, it is used for giving instructions, receiving information, exchanging ideas, announcing plans or strategies, comparing actual results against standards, laying down rules, job description and organisational manuals. Strategic management requires
communicating with individuals and workgroups to achieve objectives.
Importance of Communication
It is the motor of interaction within and outside an organisation.
It facilitates interaction with superiors, subordinates, families, friends, foes, acquitances or strangers.
It helps managers to perform their functions of planning, organising,
coordinating, directing and controlling
It helps improve management effectiveness and efficiency
Models of communication are often represented as one-way or two-way communication
One-way communication: Takes the process of the sender on one hand and the receiver on the other hand,
Two-way communication: The roles of participants in communication shift back and
fort depending on the positions of individuals in the communication process. When the receiver responds to the sender and the initiating sender becomes the receiver, a two way process is established.
Communication model is composed of: encoding, transmitting, perceiving, decoding,
and action. These essential elements of communication process are illustrated in figure below.
Sender: The originator of ideas who conceives the message and sends it to the receiver Such idea may be involuntary or instantaneous. It may as often withnessed in gmanagement, born out of a structured reasoning and planning
Message: The ideas, facts, opinions, thoughts or conceived information the sender intends to convey to the receiver
Encoding: Putting the message in a suitable and appropriate form that the receiver will understand. The sender has to ensure that the words, Images, symbols, written
spoken gesture or combination convey intended meaning to the receiver
Transmission: Method of conveying the message from the sender to the receiver. The manner of transmiting the message from sender to receiver would impact either positively or negatively on the quality of response
Media channel: Media is the means through which message is conveyed or delivered from sender to receiver. Factors to consider in deciding on suitable channel include speed, cost conviniences, confidentiality, distance, nature and type of message,
Receiver. The person or group of persons for whom the communication effort is intended
Decoding: The process by which the receiver interpretes the message and translate it into meaningful information in a way to elicit the right response. If the essage is not rightly encoded, it ay lead to possible distortion which could be wrongly interpreted
differently from the intended meaning
Noise: Distractions to communication that may interfere with the intended message before reaching the receiver
Barriers: These are individuals, groups and organisations that may prevent the message from reaching the receiver
Response: Communication according to Lawal “means transmitting messages to
people in a manner to stimulate responses” The clarity and ambiguity of information
communicated will determine the reaction of the receiver