BUSINSS MANAGEMENT TARGET DATE DONE ON

STRATEGIC MANAGEMENT AND PLANNING

1 Objectives of organisation

2 Strategy Formulation

3 Planning & Control

4 Strategic management ; the traditional approch

5 Other models of strg manag

6 SWOT & GAP analysis

7 Performance appraisal & analysis

8 Missions Goals & Objectives

9 Mergers & Acquisitions

10 Corporate Reorganisation

Strategic Management n Planning from ATFL

Strategic Management n Planning from ACCA

Case Studies

CORPORATE SOCIAL RESPONSIBILITY &BUSINESS ETHICS

11 Ethics & Social responsibility

12 Corporate Governance

HUMAN RESOURCE MANAGEMENT

13 Human Resources

14 Individuals

15 Training & Development

16 Appraisal & Career Management

17 Management & Human resource

18 Groups in Organisations

19 Strategy for Critical periods

20 Introducing Change

ATFL Same Topic

ACCA Same Topic

Case Studies

MANAGEMENT OF THE WORKING ENVIRONMENT

21 The changing environment

22 The Global Competitive env

MARKETING MANAGEMENT

23 Evolution of Marketing Concept

24 Strategic marketing and planning

25 Maketing Research

26 Product

27 Price

28 Place

29 Promotion

ATFL Same Topic

ACCA Same Topic

Case Studies

INTERNATIONAL BUSINESS

30 Globalisation

31 Global Strategy

32 Appraisal of overseas investment decision

33 Raising Capital overseas

34 Financial control within Multinatonals

35 Management of International Trade

ATFL Same Topic

ACCA Same Topic

Case Studies

CHAPTER # 1OBJECTIVES OF ORGANISATION

KEY TERMS

StrategyA Course of action, Including the Specification of Resources required, to achieve a Specific objective

Stgy is a pattern of activities that seek to achieve the objectives of the org , & adopt its scope , resources & operations to env changes in the long run

Strategic Financial ManagementIdentification of possible strategies Capable of maximising an Org's Net Present Value

the allocation of Scarce Capital Resources among Competing Oppertunities &

the implementation & monitoring of the chosen strategy so as to achieve stated Obj

Financial ManagementIt is the management of fins of business i.e Fin Planning n Controll to achieve Fin Objs of Bus

Ecology is the realtion of plants n other living creatures to each other

Stake holders invest in the effectiveness of a particular management team

REFERENCESJhonson & Scholes Characteristics of Strategic DecisionsCyret & March Concensus TheoryGranger 3 types of business objectivesArgenti Various Objectives of BusMendelew Stake holders mapping

SUMMARY

Characteristics of Strategic Decisions by J & S Objectives Of BusinessConcerned with 3 types of business objectives Granger

Scope of org's activities Mission

Matching org activities with SWOT Corporate Objective

Allocation / Reallocation of Resources Unit Objective

Affect Long term n Operational decisions

Affected by Env , Resourse capability , Values Various Objectives of Bus Argenti

& expectations of management Creation of Customers

Have implications of change throughout the org Servicing society

Complex in nature Providing Employment

Maximising Profit

Levels of StrategyCorporate As per Argenti Obj Must be Expressed as Follows

Business/Competitive Identify the Beneficieries

Operational State Nature of Objective

State the Size of Benefit

Determinants of StrategyStakeholders n Internal Coalitions Primary n Secondary Objs

Stake hold MendlewLevel of interest Hierarchy of ObjectivesLevel of power Primary Corp objs

General n Economic Influences Secondary objs

External influences

Nature of Business Trade off Between Objectives

Org culture Profitability not the best measure of objs

Economic Objectives Short term n Long Term Objs

Social Responsibilities Multiple finanacial Objs

CONSENSUS THEORY: Cyret & March Financial Objectives

Managers run a business but do not own it & that Main obj is to maximise wealth

Organisations don’t have objectives only ppl have Fin targets

Objectives emerge as a Consencus of differing Non Fin Objs

stakeholders views n r not entirely contoled by managers

Relationship between Fin n Non Fin Objs Concept of Business Green approach, Env Concerns etc

Stake holders view

Management view Envirinmental AccountingEco Balance, Cleaner Technology, Corporate Libs,

Financial management Decisions Perf Appraisal, Life cycle Assessment, Budgets etc

Investment Decisions

Take over, Merger, Divestment etc Objectives of Publically owned n Non Commercial CosManager has to Primary obj ------- not the maximisation of wealth

Identify oppertunity but to contribute to national economy

Evalute it External financing limits

Decide on optimum allocation of funds Financial manageent 4 such groups is different coz

Financial Decisions they dont have competitors

Long term ( Cap structure ) dont operate 4 profit

Short term ( Working cap ) decisons taken by polititions or civil serventsDividend Decisions

CHAPTER # 2STRATEGY FORMULATION

KEY TERMS

Long Term Strategic PlanningFormulation , Evaluation n Selection of Strategies for preparing a Long Term Plan of action to attain Objs

Planning HorizonIt is the furtherest time ahead 4 which plans can be Quantified

Strategic Planning -- AnthonyIt is the process of deciding-- on the objs of the org ,on changes in these objs, & on resources used toachieve these objective and the policies that are to govern these objs ( their acquisition , use n disposition)

Tactical or Management ControlIt is the process by which managers assure that resources are obtained n used -- Effectively n Efficientlyin the accomplishment of the orgs objs

Operational Control ControlIt is the process to ensure that Specific tasks are carried out -- Effectively n Efficiently

ExpansionIt is the Growth of Existing Products and/or Development of Exiating Markets

REFERENCESDrucker 3 aspects of Strategic PlanningAnthony Definition of Strategic Planning

SUMMARY

Business Planning Growth Strategies

Managers performance usually measured in short term Integration or Related Diversification

Fin Plan should : Horizontal Integration

Have Quantified Targets new markets existing product

Cover 3-5 or 10 years new product existing market

Be a part of Strategic Plan Vertical Integration

Advantages Farward Vertical integ

Identification of fin reqs Backward Vertical integ

Prospective use of surplus cash

Plans 4 raising required funds Diversification or Unrelated Diversification

Future profitability of comp Concentric Diversification

Optimum utilization of resources New product with similar technology

Set stds 4 measuring perf or market etc

Bottom up Approach Conglomerate Diversification

Top Bottom Apoproach New product for new customers

Long Term Strategic Planning Withdrawl or Abandonment

Drucker describes 3 aspects of Strategic planning

making risky decisions with future considerations Merger & Acquisitions

organsing systematic efforts to carryout these decis Organic growth vs acquisition

Measuring results of these decisions

Pricing

Rational Model Short term pricing

Covered with chp 4 Competitive bidding

Strategic pricing

Strategic Fund managementStrategic Cash flow Planning Regulatory Frame work of Accounting

Simillar to cash budgeting except:

longer planning horizons

Uncertain future cashflows Financial Controls

Emergeny plans Levels of Planning

Consistent with other policies Strategic Strategic vs Tactical

Effect of new investments Tactical Tactical vs Operational

Cash Rich Comps Operational

Risk Management

Working cap management

Selling off nonessential assets

Changing dividend policy

CHAPTER # 3PLANNING & CONTROL

KEY TERMSPlanning

It involves making choices between alternatives & is primarily a decision making activity

ControlIt involves measuring & Correcting actual performance to ensure that the alternatives

that are chosen & the plans for implementing them are carried out

Feed BackThe term can b used to describe both "the Process of reporting back control information to mngand the control information itself

Budget CenterEach section of an org 4 which a budget is prepared

Responsibility AccountingIt is a system of accounting that segregates Revenue and costs into areas of personal responsibility in order to Monitor n Assess the perf of each part of org

Responsibility CentreIt is a unit of an org , headed by a manager , who has direct resp for its performance

Controllable CostsThe items of Expenditure which can be directly influenced by a senior manager within a given span of time

Competitive AdvantageC Adv is a profitable n sustainable position that exists in the minds of Consumers who believe that the valuethey receive from a product/service is greater than both the price they pay n value being offered by competetors

REFERENCESPorter & Miller Implications of IT on CompetitionPorter 5 factor modelPorter 3 Generic Strategy to Achieve C Adv

SUMMARY

Planning & Control Cycle Controllability & Responsibility ReportingPlanning Steps in deciding a budget centre

Identify objectives What shd b the B Centre?

Identify potential strategies What inc , exp &/or Cap employment plans

Evaluate strategies should each Budget centre prepare?

Choose Alternative Course of Action Criteria for measuring performance

Implement Long Term Plan

Control Features of a well organised Sys Of Controls

Measure actual resultrs A hierarchy of Budget Centers

Compare them with plan Clerly identified Resps for achiving targets

Respond to Divergence from plan Resps for Rev, Cost n Cap employed

Actions taken on the basis of findings Controllable n Non Controllable Costs

Control action Controllability of fixed costs

identify n correct the problem Controllability n Apportioned Costs

No Action Controllability n Dual Responsibility

when things are goin well Control Reporting

Alter the Plan Budgetary Planning n Control Systems

if results are not good n mng Gen Obj is to ensure Communication ,

can do nothing about it Coordination n Control in an org

Feed Back Using IT As Strategic ToolSingle Loop Feedback As per Porter n Miller IT can change the nature

Relatively small variations of Competition in an Industry in 3 ways

No change in existing plans Change the Industry Structure

Associated with budgetary controls Porters iderntified 5 competitive forces

& Std Costing working in competitive env

Double Loop Feed Back Threat of new entrants

Higher level Feed back Bargaining power of suppliers

Ensures that plans, budgets, org structure Bargaining power of Customers

& control sys are changed to met the Threat of Substitues

changes in conditions Rivalry

Negative Vs Positive Feed Back IT as collaborative Venture

Feed Forward Control Electronic data InterchangeValue Added Networks

Risk n Uncertainity Creating New Business

Types of Risks

Accounting 4 Risks Be used to create Competitive Advantage

Quantifying the Risk Porters 3 Generic Strategy to Achieve C Adv

Decision Rules Cost Leadership

Decision Trees Differentiation

Managers n Stake holders Approach to risk Focus

CHAPTER # 4

STRATEGIC MANAGEMENT - TRADITIONAL APPROACH

KEY TERMSStrategy - Jhonson n Scholes

The direction n Scope of an org over the Long Term which achieves advantage 4 the org

through its configuration of resources within a changing env to meet the needs of market

and to fulfil share holders expectations

TacticsThe deployment of Resources to execute an agreed strategy

PloicyA general statement providing guidelines for management of Decision Making

Strategic ManagementThe Development, Implementation & Control of agreed stgs There is more to stgy than merely deciding what u want to achieve and how u r 2 achieve it

Corporate Strategy - Jhonson n ScholesIt is concerned with what types of business the org is in. denoting the most gen level of stg in org

Business StrategyHow an org approaches a particular product market area

SUMMARY

Strategic Mng Involves Rational ModelAnalysis Strategic Analysis

Choice Internal Appraisal

Implementation Missions n Objectives

Control Environmental Analysis

SWOT

Defining Aspects of St Mng Match Position audit with Environmental objs

Scope of activities Strategic Choice

Env Strategic option generation

Resources Evaluate options

Values Strategy selectionTime Scale Implimentation

Complexity Emboding The chosen strategy in corp plan

Strategies at Corp Business Unit LevelsOperationsMarketingR & DHRMIT / ISFinance

CHAPTER # 5OTHER MODELS OF STRATEGIC MANAGEMENT

KEY TERMSCompetitive Strategy Porter

A Competitive Strategy is the taking of Offensive or Defensive Actions to create a Defendable position

within an industry ----&---- a super return on investment

The Learning Org

An org skilled at Creating , Acquiring & Transfering Knowledge & at modifying its behaviour to reflect

new knowlegde n insight

REFERENCES

Andrews Patterns n Competences

Mintzberg Emergent Strategies

Johnson n Scholes Stgy n Managerial Intent

Herbert Simon Bounded Rationality

Incrementalism Lindblom

Kenichi Ohmae Strategic Thinking

Hofer n schendal Environmental Fit

Hamel n Prahalad Future Orientation

Ohmae CompetitionPorter Competitive Strategy

SUMMARY

Andrews Environmental Fit Hofer n schendal

Stgys are Patterns of Mng Decisions Stgy a mediating force btw org n env

Stgy is exploitation of Competences Strategic Logic

A proposed sequence of action must

Emergent Strategies Mintzberg b consistent with orgs objs n env

Task of Strategic mng is to shape n

control these strgys as they develop Future Orientation Hamel n Prahalad

Implicit or Explicit Stgys 2 suggestions

8 Styles of Stg Mng Future is not some thing that just

5 Ps ( ways in which term stgy is used happens to org

Plan, Ploy, Pattern, position, Perspective Orgs can create their future

Crafting Emergent Stgy A Diagonostic to indicate how future

Oriented a firm is

Stgy n Managerial Intent Johnson n ScholesThe Command View Competition Ohmae

Paradigm n Politics A good bus stg is 1 by which a firm can

Issue Awareness gain significant ground on its competitors

Issue Formulation at an acceptable cost

Solution Development Method:

Solution Selection Readjust current resources

Relative superiority

Bounded Rationality Herbert Simon Challenge Assumptions

Managers work till they find a Degrees of Freedom

tolerably satisfactory alternative Interplay of 3 Cs (Stgc Triangle)

Customer Comp n Competition

Incrementalism Lindblom

Small scale adjustments to past practices Competitive Strategy Porter

Creating a sustainable stgc position

Logical Incrementalism 3 Assumptions of Ohmae n Porter

Broad outlines of stgy are developed by

an indepth review , with a scope for day Learning Based strategyto day incremental decision making Knowledge as resource

Knowledger Creation

Strategic Thinking Kenichi Ohmae The learning org

Stgy is essentially a creative process Implications for stgy

It Operates as follows

Ask the right question

Observe the problem

Group Problems together

Patterns n Competences

CHAPTER # 6SWOT & GAP ANALYSIS

KEY TERMS

Corporate AppraisalA critical assessment of the Strengths & Weaknesses, Oppertunities & Threats (SWOT Analysis) in realation to the Internal & Environmental factors affecting an entitry in order to establish its condition prior to preparation of long term plan.

Crucial Success Factorsare those factors that are fundamental to Strategic Success

Jhonson n Scholes defines them as "those components of a strategy in which the org must exel to out perform competition

Gap AnalysisA comparison btw an entitys ultimate objective & expected performance of projecs-- both planned n undergoing

Forecastingis the identification of factors & quantification of their effect on an entity as a basis 4 planning

Projectionis an expected future trend pattern obtained by extrapolation

it is primarily concerned with quntitative factors while forecast includes judgement

Extrapolationis a technique of determining a projection by Statistical means

Scenariois an internally consistent view of what future might turn out to be

REFERENCES

Jhonson n Scholes Criticle success factorArgentiMercer Steps in Scenario Planning

SUMMARY

Strengths & Weaknesses Flexibility-- Strength or Weakness

Apraisal identifies the following

Shortcomings in present skills and resources SWOT n Criticle success factor

Strengths the comp seeks to exploit

Areas to look at include Analysing the planning gap

Marketing

Products n brands

Distribution 4 stages defined by Argenti

R & D

Finance Errors in Forecast

Personnel

Plant n Equipment Profit Gap

stocks

Role of Mng Accountant Other forms of Gap analysis

Cost effective programe

Product analysis Continuous Gap Analysis

Product attitude survey

Areas of Finance where weekness might exist

Oppertunities in areas of Product Profitability Scenario Planning

Macro Scenarios

Oppertunities n Threats Building Scenarios

What Oppertunities &/or Thrests exist? Steps in Scenario Planning by Mercer

Competitors response to oppertunities Industry Scenarios

Cos competitive advantage in opertunity Using scenarios 4 formulating stgs

How the thrests will affect mrkt

Combining The Elements of SWOT Analysis

Where strength matches opper - exploit position

For weakness n threats - Corrective / Contingency plan

Cruciform Chart

F0 Forecast

F0 Forecast

CHAPTER # 7PERFORMANCE APPRAISAL & ANALYSIS

KEY TERMS

Contribution MarginThe difference between the sales volume & variable costs of those sales

Capital ProjectsThese involve any long term commitments of funds undertaken now in anticipation of a potential inflow of funds at sometime in future

ROIProfit before int n tax * 100 / oprations mng cap employed

A form of return on cap employed, which compares income with the operational assets used to generate that income

Return on cap employedProfit before int n tax * 100 / avg cap employed

it indicates the productivity of cap employed

Residual IncomeIt is a measure of the centres' profits after deducting a Notional or Imputed Interest Cost

BenchmarkingThe establishment through data gathering, of targets & comparators, through whose use relative levels of performance(and particularly areas of under performance ) can be identified.

SUMMARY

Survival n Growth Benchmarking

Covered in chp 1 n 2 Types of b marking

Internal

Comparing Profit centre performance Functional

Covered in chp 3 Competitive

Strategic

Contribution as Measure of Performance Stages of Benchmarking

Contribution n Strategic Decisions B m Exercise as part of strategic Review

Entering the Market J & Scholes - Questions 2 b asked

Breakeven Alanysis Questions to b asked while selecting appropriate BM Basis

Questions to b asked Levels of BM

Exit Resources

Using NPVs to control Strategic Inv Competences in Separate Activities

Discounted cash flows Competences In Linked Activities

Advantages & Disadvantages of BM

Devisional performance through ROI & RI

Reasons 4 makin ROI a Perf Indicator Inflation

Financial Reporting For Performance measurement decide

Aggregation Consequences of Inflation

5 consequences of historical cost accounting which

Different measurement basis reduce the reliability of A/Cs due to price inflation

Net Assets Fixed asset values & depreciation

Gross Assets Cost of Sales (high stocks)

Replacement Assets Borrowing benefits

Ratio analysis

Comparison Of Accounting Figures Increase in working capital needed to

Ratio Analysis Ratio Analysis between results of support normal trading operations

current year with last year

other comps in same industry

other comps in opther industries

CHAPTER # 8MISSIONS GOALS & OBJECTIVES

KEY TERMS

Strategic Intent Its simillar to Vision but it should have an emotional core

Mission - Mintzberg Mission describes the orgs basic function in the society, in terms of products n services it produce

Mission Statement These are the formal statements of an orgs mission n may b reproduced on various places

Goals the intentions behind decisions or actions, the state of mind that derives individuals or

collecives of individuals called org to do what they do

Goal Congruence the state which leads the idvs to take actio which are in their self interest and also in the

best interest of the entity

Culture The sum total of Beliefs , Knowledge, Attitudes of mind & Customs to which ppl are exposed in their social conditioning

Beliefs are what we feel to be the case on the basis of objective & subjective information

Values are beliefs which are relatively enduring, realtively general & fairly widely accepted accepted ways of behaving in response to a given situation

Customs are modes of behaviour , representing culturally accepted ways of behaving in response to given situation

Artrfacts are physical tools, designed by men, for their physical n psychological well being

Rituals a type of activity, taking a symbolic meaning, it consists of fixed sequence of behaviour repeated over time

Org Culture it consists of Beliefs, Attitudes, Practices n Customs to which ppl are exposed during their interaction with org

REFERENCEST.R Schein 3 levels of culture in orgPeters n waterman Mackinsey 7-S ModelJhonson n Scholes The Cultural WebMiles & Snow Culture The Env & Strategy

SUMMARY

Vision n Strategic Intent Goals n Objectives Mackinsey 7-S Model Peters n waterman

what the bus in now? Goal Congruence Hard Elements

what it would b ideally? Types of Goals Structure, Strategy Systems

what the ideal world b like? Ideological Goals Soft Elements

Formal Goals Shared values, Staff, Style, Skills

Functions of strategic intent Shared Personal Goals Organisational Ice Berg French n Bell

System Goals Formal Aspects

Mission Commercial goals n objs Overt-- like Hard Elements

Elements of Mission Dealing Conflict between Goals Informal Aspects

Purpose rational evaluation Covert - Like Soft Elements

Strategy Bargaining Cultural web Jhonson n Scholes

Strategic Scope Compromise Culture n Structure Roger Harrison

Politics n Std of Behaviour Sequential attention Zeus These interelated 4 different stds

Values n Culture Set Priorities Apollo The indv

Stake holder Mapping Athena type of work the org does

Importance of Mission covered in chp 1 Dionysus culture of org

environment

Mission Statements The Role Of Culture Culture The Env & Strategy Miles & Snow

Characteristics adv of understanding culture Miles & Snow

Brevity Organisational Culture Defenders

Flexibility 3 levels of culture in org Prospctors

Distictiveness Basic underlying assumps Analysers

Overt Beliefs Reactors

Mission n Planning Visible Artifacts Denisons Model

Factors affecting org culture Consistency Culture

Functios of mission Cultural characteristics of Dynamic Comps Mission Culture

Culture n Risk Involvement CultureAdaptability Culture

CHAPTER # 9MERGERS & ACQUISITIONS

KEY TERMS

Take OverPurchase of a comp of the controlling interest in the voteing sh cap of another comp

Mergeris a Bus Combination that results in the creation of a new reporting entity , formed from the combining parties

in which the share holders of the combining parties come together in a partnership for the mutual sharing

of the risks n benefits of the combined entity

& in which no party to the comb in-substance obtains control over any other, or is otherwise seem 2 b dominant

whether any virtue of the proportion of its shareholders rightsin the combined entity, the influence of dirs or other wise

Boot StrappingThe process of buying a comp with a higher EPS in order to bost up ur own EPS

ConsortiaOrgs co-operate on specific business prospects. ???????????

Joint VenturesTwo or more orgs setup a third org

It is an arrangement where two firms (or more) join forces for manufacturing, financial & marketing purposes and each has

a share in both equity n management of the business

Liscensing AgreementsIt is a Commercial contract whereby the liscencer gives something of value to the liscensee in exchange for

certain performances n payments

Franchising is a method of expandng the bus with less capital than would otherwise be possible

REFERENCES

P.F. Drucker Rules 4 Post Acq Integration

C S Jones 5 Step integration sequence

SUMMARY

Take Overs

Rasons or Advantages of Merger/ Take overs Post Acquisition integration

Strategic Approach to Take over Rules 4 Post Acq Integration P.F. Drucker

Other Factors in Takeover Decision

Resistance from Target comp 5 Step integration sequence C S Jones

Contesting an offer

Cost of Take over bids Managing Employees

Payment Methods

Cash Merging Systems

Share Exchange

Covertable loan Stock Failures of Mergers n Take Overs

Mezzanine finance

Earn out arrangements Joint Ventures , Alliances & Franchising

Boot Strapping AdvantagesConsideration of price earning ratio DisadvantagesAccepting a dilution in eps Characteristics of Liscence agreement

Reverse Acquisition Characteristics of Franchising

Monoply Authority

CHAPTER # 10CORPORATE REORGANISATION

KEY TERMS

DivestmentsA divestment is a proportional or complete reduction in ownership stake of an org.

DemergersSplitting up of a corporate body into two or more separate n independent bodies

Sell-OffsA form of divestment involving the sale of a part of a comp to third party, usually another comp

LiquidationsIt may b due to bakruptacy or Voluntary Dissolution n involves closure of whole business , selling of all the asssets

and distributing net funds raised among shareholders in the proportion of their share holding

Spin OffsA new comp is created whose shares are owned by the shareholders of the org comp which is making the distribution of assets

MBOsIt is the purchase of all or part of business from its owners by its managers

MBIsWhen a team of outside managers as opposed to managers already running the bus mount a takeover bid and then run the bus

SUMMARY

Reasons For Divestments etc MBOs

To concentrate on a particular part of bus Questions in Evaluating a MBO

Selling a loss makin unit Mng has full range of skills?

Selling an attractive part of bus to save the rest Why is the comp 4 sale?

Liquidity problems Projected profits n Cashflows?

Sellling a subsidary with high risks What is being bought?

Selling a subsidiary at profits Price ?

Selling a subs that is a peripheral 4 group Funds availablility?

Exit Routes?

MBOs

For Mng -- method of setting up a new bus Problems

For Owners -- method of divestment Little experience of fin mang

Tax n other legal complications

Parties To MBOs Changing the attitude of employees

Management team Deciding the bid price

Directors of Group Cash 4 maintainance of fixed assets

Financial Backers Changes in HR

Ralations with suppliers / customers

Possible Reasons

Best offer may b from mng MBIsSale can b arranged quicklyGroup can still maintain relations Capital Reorganisation

N Other factors mentioned above

Going Private

Exit Strategies for Venture Capitalists From public to private comp

Sale of shares to st exchg Advantages

Sale of comp to another firm Cost saving

Selling the shares to comp itself Limited number of members

Simillar objs of share holders

Success Factors of MBOs Sh holders are close to mng

Favourable buy out price Disadvantages

Personal motivation n determination No trading of shares on st exch

Quicker decision making n more flexibility Lose of reepute

Savings in over heads

CHAPTER # 11ETHICS & SOCIAL RESPONSIBILITY

KEY TERMS

EthicsA set of moral principles to guide behaviour

Compliance Based Approach To Ethics

Ensures that the comp acts within the letter of law & that violations are

Prevented, Detected & Punished

Integrity Based ApproachCombines a concern for law with an emphasis on managerial responsibility

for ethical behaviour. It treats ethics as an issue of org culture & incorporates

ethics into corp culture n sys

Whistle Blowingis the disclosure by an employee of Illegal, Immoral or Illegitimate practices

on the part of org

SUMMARYBoundary Management

Many comps share the same aspirations

Levels of bus objectives Ansoff

Social n Ethical Environment

Environment

Political , Social , Legal

Ethical problems facing Managers

Examples od Social n Ethical Objectives

Social responsibility of org n managers

Social resp is expected from all type of orgs

Arguments against Charity etc

Arguments in Favour of Charity etc

Ethics in Organisations

Personal Ethics

Professional Ethics

Org Cultures

Org Systems

Leadership Practices & Ethics

Creative

Protective

Integrative

Adaptive

Compliance Based Approach To Ethics

Integrity Based Approach

Tasks of Ethics Management

CHAPTER # 12CORPORATE GOVERNANCE

KEY TERMS

Agency Theoryproposes that , although indv members of the team act in their own self interest , the well being of each indv depends on

the well being of other team members n on the performance of the team as compared to other teams

Agency CostDifference between the return expected if managers truly maximised shareholders wealth

and the actual return , given that managers will actually be seeking to maximise their own wealth

Goal Congruence

is the accordance between the objectives of agents acting witin an org

and the objectives of the org as a whole

Corporate Governance

Cadbury report defines corp governance as "The sys by which comps are Directed & Controlled"

SUMMARYPatterns Of Share Ownership Code Of Corporate Governance

Public Comps Directors

owned by shareholders Introduction of non executive directors

managed by managers Qualification n eligibility to act as director

ease of selling shares Tenure of Office of Dirs

Private Companies 3 years casual vac to b filled in 30days

Owner Managed Responsibilities Powers & Functions of BODs

Cant sell shares Shd b exercised with a sense of Objective Judgemnet

& independence in the best interests of listed comps

Institutional Investors Statement of ethics n bus practices

They channel funds invested by idvs Vision n Mission Statement

Advantages Internal Controls

Disadvantages Powers to b exercised by Passing Resolution

Meetings of BOD

Advantages of Knowing who major share holders are atleast once every quarter

……………………………….

Potential Sources of Conflict Orientation Cources

AGENCY THEORY CFO & Company Secretary

Theory Appointment & Approval

Behavioural AssuBehavioural Assumptions Qualification

Structural Assumptions Requirements to attend board meeings

Criticism Corporate & Financial Reporting Framework

Agency Cost Directors report to share holders

Bonding & Monitoring Procedures Frequency of Fin Reporting

Responsibility of Fin Reportin n Corp Compliance

Goal Congruence Disclosure of interest by a Dir Holding Comps Shares

Procedures Divestment of Shares by sponsers / controlling int

Profit related pay Audit Committee

management audit procedures Composition

Frequency of Meetings

Information Sensitivity & Disclosure & Confidentiality Attendance

Terms of Reference

Reporting Procedures

Internal Audit

External Auditors

Compliance with code of corp governance

CHAPTER # 13HUMAN RESOURCES

KEY TERMS

HRM Is concerned with ppl at work n their relationships as they arise in the working env

The real requirement is proactive and constructive rather than Defesive n Reactive

to discharge their true role , personnel managers must anticipate the needs of the org in the short n the long term

They must develop policies to produce solutions to anticipated problems resulting from ext / internal env,

whilst influencing n creating the attitudes amongst employees needed 4 the enterprises' Survival n Success

HR Planning Concerns the Acquisition , Utilization , Improvement n Return of an enterprises' HRs

HR planning deals with Recruitment , Retention , Down sizing , Training n Retrainingto enhance skill base

SUMMARYObjectives of HRM The HR Plan

Organisation Requirements Strategic AnalysisCooperative Relationships The environment (PEST)Responsive to change Man power (SWOT)

Social n Legal Responsibility HR utilization

Objectives

Adnatages Time scales

Lncreased productivity

Increased group learning Forecasting

Low Staff Turnover Estimating Demand

increased Initiative Estimating SupplyHR as a sourse of competitive advamtage Current workers

Labour Market Research

Views of HRM position surveyThe old "odd job view" Closing the gap btw dd n supply

According to Drucker Making subsidery plans to implement HR plans

"The personnel manager saw his role aspartly a file clerk's job Job Analysis

partly a house keeping job Investigating tasks performed in each job partly a Social worker's job Identifying the skills required

and partly "fire fighting " to head off

union trouble or to settle it" Relevent conceptsJob description

HRM - Changing Trends Job title , Reporting to , Subordinats

Real req is proactive.... Overall purpose , Accountability , Flexibility

Job Specification

Roles of HRM Job Design 4 major roles suggested by Tyson Person Specification

To represent the orgs central value sys Assessing patterns of personality

To maintain the boundaries of the org Desirable qualities in managers

To provide continuity n stability to orgTo asdopt the org to change Implementation

Two optionsExistence of a seperate HRM department depends on : Training Existing staff ( discussed in net chps )

Size of the org Recruiting new staffActivities of the org Advertising

SelectionRole of HRM department Applications n CVs

Organisation Sift through ApplicationsOrganisation Design InterviewsOrganisation Development Testing

Manpower Weightage of BiodataPlanning Group selection methodsRecruitment ReferencesEmployment NotifyingTraining Preparing Employment ContractsPerformance review Induction trainingManagement Development On day one

Motivation Post employment trainingJob designRemuneration Copeing with Culture Shortage Or Surplus of HRs

employ commitment is supposed to replace Internal transfers Restricting Recruitmenttechniques of control imposed by management Promotions Pert time working

Employee Relations External recruitments RedundanciesDealin with trade unions Reducing Turn over Cuting wastage of resourcesConsultation n participation Overtime

Employee Services TrainingHealth n safetyIndv employee welfare Control over Human ResourcesPersonnel records Gap analysis etc

CHAPTER # 14INDIVIDUALS

KEY TERMS

PersonalityThe total pattern of characteristic ways of "thinking, Feeling & Behaving "

that constitutes the indvs' distinctive method of relating to the env

AttitudeAttitude is the position that an ind has adopted in response to a theory or belief ,

an object, event or other person. It is a subjective concept rather than Objective

Orgs usually have generalised assumptions as to type of employees they would wish to employee

and to whome they would wish to allocate various tasks n responsibilities

In unfavourable markets a happy work force may not make an org profitable

but they ll necessarily be more productive

Content Theories

assume that human beings have a package of Motives which they pursue

ie they have a set of needs or desired outcomes

Process Theories

explore the process through which outcomes become desirble and are pursuaded by individuals.

this approach assumes that a man is able to select his goals n choose the paths towards them ,

by a consious or unconsious process of calculation

Motivators

produces satisfaction when present n capable of motivating the individuals eg Achievement , Growth

Status , Advancement , Gaining Recognition , Being given Responsibility Challenging work etc

Hygiene Factors

or maintenance factors -- these could not give satisfaction or motivation when present but there absence

however causes dissatisfaction. Eg Comp policies , Salary , Job Security ,Workin conditions etc

The need to avoid the unpleasantness is satisfied at work by hygiene factors

The need 4 personal growth is satisfied by motivator factors n not by hygine factors

Expectancy Theory

The strength of an indvs' motivation to do something ll depend on the extent to which he expects

the results of his efforts if successfully achieved , too contribute towards his personal needs or goals

The strength of an individuals motivation is a product of 2 factors

The strength of his preference 4 a certain outcome - Valence

The individuals expectation that the outcome ll result from a certain behaviour

( subjective probability)

CHAPTER # 14INDIVIDUALS

SUMMARYPerformance n Productivity Motivation

Variables Affecting Performance Content TheoriesIndividual Variables Maslow's Hierarchy of Needs

Education Self actualisation ( fufilment of personal potential)

Experiance Esteem Needs ( independence , status , respect )

Intelligence / Apptitudes Love / social Needs ( relationships, affection )

Motivation / Interests Safety Needs ( security , peace , order )

Personality Characteristics Physiological needs ( food , shelter )

Personal Circumstances

Organisation n Social Variables Plus 2 higher order needs

Socaial Env Freedom of inquiry n expressionTypes of incentives Need 4 knowledge n understandingType of training n Supervision

Situational Variables ERGCharacter of Org The need 4 existence

Phy environmemt The need to relate to others

Pyhsical n job Variables The need 4 personal growth

Work space n arrangements also called "Existence- relatedness- growth"

Design n Condition of Working EnvMethods of Work Herzberg - Two - Factor Content Theory

Managers attitude n org Culture He distinguished between hygiene facors n

motivating factors based on what he saw as 2Individuals separate "need systems" of individuals

Personality

Individual Development Process Theories

Characteristics as indvs mature Expectancy Theory

Organisations interest in Personal Development M = V x EFrustration , Conflict , Feelin of Failure "M" is the strength of motivation to do sth

Low Prospects etc causes High labour "V" is 4 Valence ir strength of his preference

Turnover , Absentecism , n Preoccupation for a ertain outcome

with financial reward that is Self Destructive "E" is Expectation that bahaviour will result

for the org in desired outcomePorter n Lawler

Personality Differences n Work Behaviour Equity TheoryExtroverts Goal Setting TheoryNeurotics / Introverts

Psychological contractsType of Behaviour Coercive

Authoritarianism CalculativeNeed 4 Achivement CooperativeSelf Esteem

Attitudes Pay n Job SatisfactionDepends on Difficulties associated with insentive plans

Perception Assessment of satisfaction n MoralePersonal Experiance Alleviating dissatisfaction n low morale

Positive attitude leads to ...Indirect influences on Attitude

CHAPTER # 15TRAINING & DEVELOPMENT

KEY TERMSResourcing an Organisation

is about building n maintaining the "skillls n knowledge base" of the org

Human Resource Development (HRD)The process of extending personal abilities n qualities by means of "Education, Training n Other Learning experiences"

Developmentis the " growth or realisation of a person's ability n potential through the prov of learning n educational experience "

Trainingis the " planned n systematic modification of behaviour through learning events, programmes n instruction which enable indvs to achieve the level of knowledge, skill n competence to carry out their work effectivly"

Learning OrganisationAn organisation that facilitates the learning of all its members n continuously transforms itself

Personal Development Planis a clear development action plan for an individual which incorporates a wide set of developmental oppertunities including formal training

Skillswhat the indv needs to b able to do if results are to b achieved. Skills are built up progressively by repeated training.

Validation of TrainingObserving the results of the course and measuring whether the training objectives have been achieved

Evaluation of Training

Comparing the actual costs of the scheme against the assesed benefits which are being obtained

If the costs exceed the benefits, the scheme ll need to b redesigned or withdrawn

SUMMARY

Purpose of HRD Investors in ppl Training Methods

To meet req level of perf Aspects On the Job

Continuous improvement in per Planning Instruction

Maximising ppls potential 4 growth Regular review Job rotation

Development activities Action Develop the perception

Training Evaluation Assistant to position

Career planning Training Process in Outline Committees

Job rotation Identify org's training needs Projects

Appraisal Define learning requirements Action Learning

Other learninig oppertunities Define training objectives Formal - Course Training Methods

Training n Development Stgy Plan training Programes Lectures

Based on overall stgy of firm Implement training Discussions

Identify skills req Evaluation case study

Draw Formal development stgy Feedback Exercise

Implementation Training Needs Analysis Role Play

Qualities of Good Training Training surveys Computer based training

Relevence Bus strgy

Problem based Appraisal / performance reviews Course may b

Action oriented Attitude Surveys Internal courses

Performance Related Evaluation of existing programes Day release

Benefits of HRD to Org Job analysis Distant learning

Lower learning cost Training Gap Revision Courses

Avoid accedients is the gap btw Block release

Low supervision needs Current Status Sandwitch Course

Flexibility Skill base

Source of motivation Indv Performance Learning Styles

Delegation of speacialised skills Org's current results Theorists

Copeing with new advancements Desired State Reflectors

Corporate Culture Knowledge n Skills needed Activists

Training Does not Covers required Std Pragmatists

Poor job design, equipment etc Desired results / stds Learning Cycle

Bad management Programing objectives Concrete experience

Bad work env Moving from current - desired Observation n reflection

Personal handicaps Personal Development Plan Formin abstract concepts n

Motivation Purpose generalisations

Poor recruitment Stages Applying / testing the implications

Advantages to Individuals Analyse current position of new concepts in new situations

Increases Portfolio of skills Personal SWOT analysis Evaluating Training

Psychological benefits Liking of skills Validation of training

Social benefits Performance Evaluation of training

Better perormance on the job Set goals Methods

The Laerning Organisation Draw action plan Tests

Characteristics Programing Objectives Direct questioning

Role of Training Behaviour Effect of training

Enables skills 2 b diseminated Standard Difference in corp obj

oppertunity 4 ppl to work together Environmental Trainees reaction to experience

( all objs shd b SMART ) Change in job behaviour

Impact on organisation's goals

CHAPTER # 16APPRAISAL & CAREER MANAGEMENT

KEY TERMSAppraisal

is the systematic review n assessment of an employee's performance, potential n development needs.

Educationis that process that results in formal qualifications up to n including post graduation degrees

Trainingis the formal learning activities which may not lead to qualifications, n which may b received at any time in a working career

Developmentis a broader term including " job experience n learning from other managers, particularly one's immidiate superior"

Managing CareersA technique whereby the progress of indvs within an org from job to job is planned with organisational needs and indv capacity in mind

Management developmentProcess of improving the effectiveness of an indv mnager by developing the necessary skills n understanding of org goals

Effective appraisal depends on integrity n ability n efforts of indv managerAssessment must b related to an established std inorder for comparisons to b made btw individualsAppraisal reflects the values an org seeks to promoteA correct appraisal with correct implementation of action plan onfluence success of org

SUMMARY

Purpose of Appraisal Problems with Appraisal

Systematic n planned review of Confrontation

Performance ( behaviour of person ) Biased report

Potential (capacity of person) Perf levels not being standerdised

Training Needs Subjective feedback

Identifies indvs having potential 4 growth Feed back based on recent perf only

Determines key areas of improvement Disagreement on long term prospects

Manpower planning One sided process

Increases Communication Appraisal as chat

Monitoring org's selection procedures Appraisl as Bureaucracy

Need For Appraisal Appraisal as unfinished business

Compel to analyse performance Different ppl having different criterias

Justifies the judgements Assessor possesses some desired traits

Give feed back to appraisee Limiting the expression to checklist

Process Of Appraisal Managers may not have time to observe

Identify criteria 4 assessment Indvs perf may b affected by others

Assessment report by manger Appraisl is often defesive ( interplay of emotions

Assessment interviews playing with someones carear etc )

Review by assessors supervisor Org culture may not take appraisal seriously

Prepare n implement Action plan Appraisal n Pay

Follow up Problems in giving performance based reward

Approches 4 Assessment Interview Lack of funds

Tell n Sell method Some firms have to "run to stand still"

Tell n Listen Method Small cash pay increases in low inflation economy

Problem solving approach Comparison btw indvs is hard

Folowup Procedures Pay is given 4 future not past

Discuss results with appraisee New Approches to appraisal

Carryout proposed action (promotion / training) Upward appraisal

Monitor the perf Customer appraisal

Get feedback n make necessary changes Degree Appraisal

Points to b Considered Managing Careers

Org plan n problems Advantages

Personal characteristics Indv n Org Issues

System problems Model A

Relevence Model B

Fairness Future / Long Term Planning For C Mng

Serious intent Education Training n Development

Cooperation

Efficiency Dev

Techiniques of appraisal Tr

Overall assessment Edu

Guided assessment

Grading system Management development

Target oriented methods Necessary Skills

Behavioural Incedent Methods General skills

Result oriented schemes Ability to motivate n organise others

What Is Appraised Goal matching of department

Key performance issues relate to job discription Coordination of dep

Personality is not relevent unless directly related Understanding other dep's goals

Competence Techniques

Ability to transfer skills Formal education n training

Self Appraisal Group learning

Saves time n cost Confrences / Seminars

Increases responsibility n motivation Counselling with seniors

May reconcile goals of indvs n org on the job learning

But ppl are not often the best judge of themselves Transition from Functional to General Management

Effectiveness of Appraisal Roles Funct Mng Gen mng

Depends on Orientation Task oriented Goal oriented

The effort put in by mangers Role Organiser Facilitator of res

Integrity of managers Goals Short term long term

Ability to write

Observation of manger

CHAPTER # 17MANAGEMENT & THE HUMAN RESOURCE

KEY TERMSTwo imp variables in managerial effectiveness are style and a capacity to motivate subordinatesA managers style is the way in which the manager handles his or her relationship with the task n with subordinatesThis is sometimes referred to as leadership which is the process of influencing others to work willingly and to the best of their capabilities

Responsibility Is the lib of a person to discharge duties. The concept of responsibility is associated with AccountabilityManagers are accountable to their supervisors as to how well they have delegated their duty

Organisational AuthorityThe scope n amount of discretion given to a person to make decisions, by virte of the position he or she holds in the org

Delegation Of AuthorityAssignment of authority to subordinates with with the discretion to make decisions within a certain sphere of influence

Power is distict from authority but is often related to it. Whereas authority is the right to do something, power is the ability to do it

Influence The process by which a person in an org changes the attitude of another through eg Force, rules, Persuation, Bargaining n NegotiationAuthority n power in an org defines two things

The part that each person is expected to performThe relationship btw members

So a manager delegates authority to his subordinates which creates responsibility while the subordinate in responce is accountable to his manager

n the manger is accountable to his superior

Discipline Discipline promotes good order n behaviour in an org by enforcing acceptable stds of conduct.

It can be enforced by sanctions, encouraged by example or created by indv's own sense of what is fitting n proper

Incompetence employees best efforts have not reached the stds required

Misconduct Delebrately not doin the best

SUMMARY

Management / Leadership Theories Power at Different Levels

Trait Theories Senior mng

Certain traits makes a person good leader Middle mng

Style Theories int groups

Heckman Dept powers

Dictatorial Discipline

Autocratic

Democratic Disciplinary Problems

Laisez Faire Absenticism

Ashridge Management College Poor perf

Tells Bad attitude

Sells Breach of safety rules

Consults Refusal to carry out instructions

Joins Disciplinary Actions

Rensis Likert ( Style n Effectiveness ) Reprimand

Four main elements in Effective managers Informal talks

High performance Writtem warnings

Employee centered Demotion

Give independnce to subordinates Discharge

Participative Trust Disciplinary lay offs / Suspension

Blake's Grid Causes of dismissal

X axis - Concern 4 production Unfair Dismissals

Y axis - Concern 4 people Redundancies

Points

Impoverished Health n Safety at work

Country club Physical n Psychological Health

Task Management Importance of health n safety in org

Middle road Causes of Accidents in relation to work place

Team Duties of Employer

J Adair's Duties of Employees

Create balance btw Systematic approach towards health n safety

Task needs

Group needs Discremination N Equal Oppertunity

Indv Needs Special entitlement in case of Maternity

Power Ways of Discremination

Types of power Direct

Physical power Indirect

Resource power Position (Quota schemes etc)

Negative power Equal oppertunity employers

Position / Legislative power

Expert power National Legislations

Personal power

CHAPTER # 18GROUPS IN ORGANISATION

KEY TERMS

GroupIs any collection of ppl who perceive themselves to b a groupA primary working group is the immediate social env of the indv worker

TeamIs a small number of ppl with complementary skills who are committed tp a common purpose, performance goals n approach for which they hold themselves basically accountable

Team WorkingTeam working allows work to b shared among a number of idvs , so it gets done faster without ppl losing sight of their whole tasks orhaving to coordinate their efforts through lengthy channels of communication

SUMMARY

Creating Effective Teams Political Behaviour

Groups Aspects of organisational politics

Common sense of identity n belonging Mintzberg - Various Political games

Loyalty to the group Games to ...........

Purpose n leadership Resist authority

Teams Counter this resistance

Aspects of team Build power bases

Work organisation Defeat rivals

Control Change the org

Knowledge generation Political Activities can occuer in Following ways

Decision making Structural Changes

Multi disciplinary Teams Interdepartmental Coordination

Multiskilled Teams management Succession

Development of Teams Allocation of Resources

Forming Political Tactics

storming Increase the power base

Norming Build Coalitions

performing Expand networks

Ideal team Characteristics Constrain the decision

Problems with teams Withhold inf

Creating an Effective team Present inf in a distorted manner

Givens Reimpose sales procedures etc

Intervening Factors By pass formal channels of communication

Outcome Managerial Response To Conflict

The value of groups as work units Initial Mng Response May Be

Limitations of Teams Denial

Group Norms Suppression

Dominance

Conflicts in Organisations Compromise

The Happy Family View Integration / Collaboration

The Conflict View Conflict may b Reduced by

The Evolutionary View Structural seperations

Constructive n Destructive Conflict Bureaucratic authority

Charles Handy - Differences appear in 3 ways Limited Communication

Arguments Cooperative Behaviour Might b Encourged by

Competition Integration devices

Conflict Confrontation / Negotiation

Conflict in Groups n deparments Consultants

Ways in which groups behave Job rotation

Group cohesion , competition n conflict Super oriented goals

Conflicts Intergroup training

Between groups Conflict Btw Mng N Organised Lab Unions

Withing Groups More problamatic

Between competing groups Needs collective bargaining

Win / Loose situation Joint mng union committees

chrs of winning group

chrs of loosing group

Cohesion n group thinking

Group subcultures n conflicts

Causes n Tactics of Conflict btw deps

Operative goal incompatibility

Differenciation

Task interdependence

Scarcity of resources

Power distribution

Uncertainity

Removal sys

CHAPTER # 19STRATEGIES FOR CRITICAL PERIODS

SUMMARY

Mainitaining Changes in Times of Change Models of Growth n Development

Organisational Change Criterias 4 Measuring growth

Change within Reasons 4 Growth

Chg dueto external Pressures Greiners Model

PEST Phase Crises of Growth Through

Customers 1 Leadership Creativity

Competitors etc 2 Autonomy Direction

Nature of Change 3 Control Delegation

Products Produced 4 Red Tape coordination

Services Provided 5 ? Collaborations

Methods Of Production X axies - Age of org ( young - mature )

Style Of Leadership Y axies - Size of org (large - small)

Working Conditions Criticism

Personnel Policies Logical Incrementalism

Org Structures / Size Issues of Size

Organisation Life Cycle Large orgs

Sigmoid curve Small Orgs

Birth Contraction & Decline

Growth Causes

Maturity Environmental Entrophy

Decline Vulnerability

Organisational Atrophy

4 Stages in Crises

Blinded Stage

Inaction / Hidden Crises

Faulty action / Disintegration

Crises & Collapse or Dissolution

Remidies

Feed back failure

Turn Round

Recovery policy

Contraction

reinvestment

Rebuilding

Structural Reorganisation n Redevelopment

CHAPTER # 20INTRODUCING CHANGE

KEY TERMS

Learning also involves relearning / not merely learning new things but trying to unlearn what is already known

"Behavioural Diagonosis" analyse the disturbances caused to cultures n power structures in each unit

Force Field AnalysisIt is based on interplay of Restraining n Driving forces that keeps things in equilibriumSo it maps the forces that are pushing towards the preferred state n the restraining forceswhich are pushing back to current state

Organisation development MethodsSet of techniques intended to improve effectiveness by improving the relationships btw ppl in org

SUMMARY

Methods of Change Possible reactions to change

Steps involved Acceptrance

Determine need 4 change Indifference

Prepare tentative plan Passive Resistance

Analyse probable reaction Active Resistance

Final Choice Overcoming Resistance

Establish Time Table Force Field analysis

Communicate the plan Restraining Forces

Implement Dislike 4 work

The Change Process Over Production

Unfreeze existing behaviour High stds of perf

Attitudinal / Behavioural change Dislie 4 supervisor

Refreeze new behaviour Deriving Forces

Ways of Bringing Change Fear of Dismissal

Coerceive Change fin Incentives

Adaptive Change Fear of loosing previalages

Managed Change Pressures from mng

Crises Management Factors to b Seen While Introducing Change

Further Strategies Place

( after eliminating unnecessary resistance ) Manner

Spread over greater time Scope

Exclude the ones not willing to change Organisation development Methods

Make indvs responsible for Drawbacks

Implementation Using an External Consultant

Decision Making Phases involved

Recognition of problem at work

Resistance To Change Assesing that it cant b soved internally

Change may b Outsourcing the change to external consultants

Psychological change Data gathering

Phsiological change Diagonostic Exercise

Time Identification of weeknesses

Circumtance Cure

Forms / Causes of Resistance Strategy Formulation (FDD)

Communicating to employees

Corporate Culture n Change

Cultural change

Unhealthy Culture

Cultural Gaps

CHAPTER # 21THE CHANGING ENVIRONMENT

KEY TERMS

Political Riskin a decision is the risk that political factors will invalidate the stgy n perhaps will severely damage the firm

ForecastPrediction of future events & their quantification for planning purposes

Forecasting is done to analyse the env & its affect on the bus & what strategies are useful

Strategic Intelligencewhat a comp needs to know about its bus env to enable it to anticipate change & design appropriate strategies

that ll create bus value 4 customers & b profitable in new markets & new industries in future

Exchange Rate The rate at which a national currency exchanges 4 another national currency

Econometrics Study of economic variables & their interrelationship

SUMMARY

Relating Org to environment Technological Env

org Effects may b

task env Gain in output

general env Reduction in Cost

Stgy ensures environmental fit 4 org New type of Products

Complexity Org would have to keep an eye on

Dynamism Type of product / service

Timesacale horizon Production process

short term Ways of Providing services

long term Ways of Identifying markets

Political / Legal environment Social consequences of TecnologyLegal Frameworks

Specific Regulations n Policies of govt in respect of Interest n Pressure Groups any bus / industry ( TR Porter) Exist within n outside the firm

Incentives Cause Group

Entry Barriers Interest Group

DivestmentCompetitors ForecastDemand Time series analysis

Political Risk Regression Analysis

Effect of Govt Agencies on operations

Influencing Govt Policies Strategic Intelligence

Questions to b asked by comps to themselves Strategic Intelligence Model

Economic Environment Sensing

Increase / Decrease in GDP Collecting

Inflation Organising

Tax levels Processing

Govt spending Communicating

Business cycle Using

Gov Policy Sources of Strategic intelligence

Fiscal Policy Internal Monetary Policy External

International Trade n X Rates Key Dimentions In Strategic Intelligence

Floating X rate inf culture

Fixed X rate Future Orientation

Demoraphic Factors imp 4 Org Structure of inf flow

Growth , Age , Geography , Employment Processing Strategic intelligence

Social Structure, Household/ Family Structure Time Horizon

Privatisation of Public sector Organisational Memory

Objectives …………… Env data ought to b included in a Data baseSocial n Culturl Env ………………..

Underlying characteristics of Culture Strength of customer position depends on

Purposeful ……………Learned Internet

Shared Database inf System

Cumulative Workin env in Pakistan

Dynamic

Value 4 Bus

4 Marketing

4 HR Managers

Society can b divided in Subcultures

CHAPTER # 22THE GLOBAL COMPETITIVE ENVIRONMENT

KEY TERMS

Market:comprises the consumers or potential consumers who have needs which are satisfied by a product / service

Industrycomprises those firms which use a particular Competence, Technology, Prouct, or Service to satisfy

customer needsCompetitive Forces

External influences upon the state of actual or potential competition in an industry , whichcollectively determine the profit (long term return on capital ) potential of the industry as a whole

SubstituteA good or Service produced by another industry which satisfies the same customer needs

Competitive PositionThe market share, costs, prices, quality & accumulated experience of an entity or a product

realative to competition

Competitor AnalysisThe systematic review of all available information ( marketing, production, financtial etc )

on the activities of competitors in order to gain competitive advantage

SUMMARYCompetitive Forces

Porter 5 Factor ModelThreat of New Entrants

Entry BarriersThreat From Substitue Products

Bargaining Power of Customers

Bargaining Power of Suppliers

Rivalry among current competitors in Industry

Impact of IT on Competetion

Impact of Globalisation on CompetitionGlobalisation of Markets

DemandSupply

Polices

Factors affecting Globalisation of World Trade

Competitive Advantage Of A Nations Industry

Determinants of National Competitive Advantage

The Dimond Model Porter

Firm Strategy, Structure, Rivalry

Factor Conditions

Related & Supporting IndustriesDemand Conditions

Influencing The Dimond

Interactions between the determinants

Competitor Analysis

Analysing competitors goals

Competitor Response Profile

Management Accountant n Competitor Analysis

Competitor Modelling

CHAPTER # 23THE EVALUATION OF MARKETING CONCEPT

KEY TERMS

MarketingMarketing is the management of Exchange Relationships

Marketing is concerned with meeting business objectives, by providing customer satisfaction

Product Orientationis the management view that success is achieved through producing goods of optimum quality n costs

and therefore , the major task of management is to persue improved production n distribution effeciency

Sales OrientationIs the management ofview that effective selling n promotion are the keys to success

Marketing Managementis the process of Devising, Implementing & Monitoring the Marketing Plan

Marketing Auditis a systematic analysis & evaluation of the org's marketing position & performance

Consumerismis a term used to describe the importance n power of consumers.

Marketing MixA schematic plan to guide analysis of marketing problems through utilisation of

a list of the important forces ementing from the market which bear upon the

marketing operations of an enterprise &

a list of elements ( policies n procedures) of marketing programmes

Mass production techniques shifted the focus from "how to produce enough" to " how to increase demand"

Thinking about the customer needs

A successful stg needs to fit into the external operating environment, but remains consistent with

internal attitudes & beliefs / capabilities

SUMMARY

History of Marketing Marketing Environment

Features of a Market Oriented Organisation The Micro Environment

Market Orientation Vs Sales / Production Orientation The market env the org operates in

Need 4 Sales Force Consumers

Problems in Introducing The Marketing Orientation Distributors

How Marketing Fits into Business Operations Suppliers

Ensure that all deps are working towards same goal Competitors

Scope Of Marketing Interest groups

Product Planning Internal aspects of the org

Branding Culture

Pricing Skills

Channels of Distribution Benefits of understanding the env

Selling Personnel Marketing AuditAdvertising / Marketing Communications Marketing CapabilitiesPromotions Performance EvaluationServicing Competitive Effectiveness

Potential Conflicts between departments The Macro Environment

Concerned with broad trends & patterns in society

Marketing Management PEST factors

Analysis

Planning Ethics / Consumerism

Control Rights of Consumers …….

Marketing Mix

CHAPTER # 24STRATEGIC MARKETING & PLANNING

KEY TERMS

Strategy does not just focus on organisational effeciency. It is more imp that the org shd b effective

Effeciency here relates to doin a task well, but Effectiveness relates to having the right products in

the right place at the right time

Profit first depends on the nature of the stg n 2ndly on the inherent profitability of the industry

SUMMARY

Marketing Strategy Targeting

Components of Strategic Marketing Undifferentiated

Designation of Specific Desired objectives Concentrated

Commitment of resourses to these objectives Differentiated

Evaluation of a range of environmental influences

Advantages n Disadvantages

The Planning Cycle

(Also discussed in chp 2 ) Over differentiated

Where are we now? Marketing Audit

Where do we want to be? Deciding Objectives Positioning Products / Brands

Which way is best? Deciding Strategy Possible positioning characteristics

How do we get there? Deciding Tactics Perceptual map

Getttin there ! Implemention Identifying a gap in the market

Ensuring Arrival ! Controlling Competitive positioning

Fragmented markets n market segments

Marketing Planning & Strategy

Must b in harmony with over all corp goals The Marketing Plan

Corp objestives ll b translated in SMART marketin objs Relationship with overall corp plan

Stgy development links corp n market level plans Phases of Marketing Plan

information may b gathered by Situation Analysis

Situation analysis Objectives n Goals

Swot analysis Marketing Strategy

PEST n other environmental analysis Action Programe

Porter 5 factor model Budgets

Planned activities shd b flexible Controls

Cost focus n differentiation

Formulating Marketing StrategySegmentation Quantify Targets

Steps in Analysis of Segments Other techniques like PLC

Market segmentation n Marketing plan Operational Plan

Properties of each segment Tactical Plan

Basis 4 segmentation

Typical market segment Objectives of devising a marketing mix

Family life cycle

Jicnaras Scale The Marketing Budget

Psychographic segmentation / Life style Segmentation Importance n advantages

Geo-demographic segmentation Matching forecast demand with capacity

Requirements 4 effective market segmentation Advertising budget decision

Measurability Control

Assessibility Allocation of Costs

Substantiality

Segmentation of Industrial market The Marketing Audit

Benefits of segmentation Overviewing the marketing process

Internal n external Aspects

Ansoff matrix

IT in marketing Audit

CHAPTER # 25MARKETING RESEARCH

KEY TERMS

Marketing Research

Market Research

Primary data

Secondary Data

MIS

SUMMARYCharacteristics of Marketing Researh Pre testing / Post testing

Motivational ResearchAim - To Reduce Cost Lab tests

Rating tests

Types of Market Research Test Marketing

Product Research Simulted store technique

Points to b considerd - New Ideas Controlled test marketing

Keeping ongoing goods under review Post testing

Market Research Recall tests

Cost effectiveness Recognition tests

Research Procedures EPOS information

Define Problem Internet

Collection of data D S System

Presentation of data Recording Data about attitudes

Management decisions Likert scales

Design of research Semantic differential scales

Alanysis of data Evaluating Data

price research Statistical Techniques

Sales Promotion Research Multiple Regressio AnalysisDistribution Research Discriminate Analysis

Tests of Statistical Significance

Primary Data Interpretation of ResultsMethods

Experimentatin Secondary Data

Observation Sources

Sampling Internal

Mathods External

Random Sampling

Systematic Sampling Inhouse or External agencies

Multistage Sampling Advantages / Disadvantages etc

quota Sampling

Cluster Sampling Management Information SystemPotential Faults Contains inf from

Questionaries Internal reportsPostal Surveys Marketing Intelligence sysConsiderations in designing Marketing Research System

Consumer Pannels Analytical Marketing SystemTrade Audits / Retail Audits Considerations 4 a good storage n retrival sys

Qualities of InfDissemination of infDesign of MIS

Basis .... User needsComponents

Sys inputsData ManipulationSystem outputs

CHAPTER # 26PRODUCT

KEY TERMS

Product In the Context of marketing a "product is something that satisfies a set of wants" that a customer have

Consumer Goods Sold directly to the person who will ultimately use them

Industrial Goods Used in the production of other goods

PL Cycle Plc has an almost biological basis. It asserts that products are Born (or introduced),

grow to reach maturity, n then enter old age n decline

Product Portfolio A comps product portfolio is all the product lines n items that the comp offers 4 sale

Pr Markt Matrices Used to classify a product or even a business according to the features of the market and of the product

Services Any activity of benefit thatone party can offer to another that is essentially intangible n doesnot result in ownership of anything

Inovation is the life blood of a successful org n the management of this innovation is central to its success

It may b immpossible to obtain influence orcontrol over perception of what is good or bad customer service

Effective marketing strategy ensures that the orgs resources are directed to the most suitable market segement

SUMMARYThe Product New Product Development

Attributes of a Product New prod may b developed by ...Tangible Attributes (Quantitative) Technical break throughsIntangible Attributes (Qualitative) Change in society

these may b interlinked To copy n capitalise on success of

Product Classification existing products

Consumer Goods What is anew product .....

Convinience goods Opens new markt

Shopping Goods Replacs existing prod

Speciality Goods Brodens existing market

Unsought Goods An Old product can b new if...Industrial Goods Introduced to new market

Installations Packaged differently

Accessories eg PCs Differet marketing approachRaw materials Change in marketing mix

Components Degrees of Newness

supplies Unquestionably New products

Partially new products

The Product Life Cycle (PLC) Major product ChangePhases Minor Product change

Introduction Sources 4 New Products

Growth Liscencing , Acquisition etcMaturity Screening New Product IdeasDecline Graph

Senility Y axies - # of new ideas

Exceptions X axies - Stages in screening process

Buyers through PLC stages Initial assessment

How are PLCs assesed ? Bus Analysis

Decisions to b taken after assesment Development

Criticism of PLC Test Launch

Strategic Implications of PLC Launch

CommersialisationProduct Portfolio Planning New Product Development Plan

Product Mix ( Ascepts / Chrs of portfolio ) Only take new prod to adv stage if Width Adequate demandDepth Compatible with existing mrkt abilityConsistency Compatible with existing production ability

Extending the product mix StagesConception of Ideas

Product Market Matrices Screening of ideasThe BCG Matrix Bus Alanysis

Stages Product DevelopmentProblem Child Marketing Mix IssuesStar Product LaunchCash cowsDogs Services n Servie Marketing

Criticism Distinguishing Features - Goods vs ServicesThe GEBS Matrix Intangibility

Classifies products or bus according to : InseparabilityIndustry Attractiveness HeterogeneityBusiness Strength Perishability

(Strong , Avg , Weak) ownershipWays of Countering it

Packaging Intanginility - As a matter of degreeFunctions Marketing Implications

Protection of contents HeterogeneityDistribution Marketing Mix 4 ServicesSelling 4 Ps + 4 moreuser Convenience PeopleConfirm to govt regulations Process

Physical evidenceQualities required of good packaging Personal SellingPackaging - an imp aid to selling Quality Differentiators

Product Vs Service

CHAPTER # 27PRICE

KEY TERMS

PriceCan be defined as a measure of the value exchanged by the buyer for the value offered by the seller

It reflects the cost of producing the product to seller n the benefit of consuming the product to buyer

Price Sensitivity

Refers to the effect a change in in price ll have on customers

SUMMARY

Price Methods of Price Determination

A competitive tool to differentiate a product Price setting in Theory

Shd b consistent with other elements of mix Price Elasticity of Demand

Contributes to overall image of product % change in qty demanded

Objectives specified 4 pricing decision % change in price

Maximising profit Price setting in Practice

Maintaining or Maximising Market share Market Pentration Objective

Market Skimming Objective

3 main influences on Price Early Cash Recovery Objective

Cost Product Line Promotion Objective

Competition Intermidiate Customers

Demand Cost Plus Pricing

Price Sensitivity Target Pricing

It ll vary amongst purchasers Price Discrimination

Those who can pass it to others ll Going Rate Pricing

be least sensitive Quantum Price

General Findings Od Number Pricing

Typical Demand curve One Coin Purchase

Curve not a straight line Gift Purchase

Exceptions Product Line Pricing

Factors affecting pricing Decisions Competitive Pricing

Intermidiaries' objectives Price Leadership

Competitors actions

Suppliers Absorption n Marginal Costing

Inflation

New product pricing Breakeven Analysis

Income effect Breakeven point =

Multiple products total fixed cost

Price sensitivity contribution per unit

Quality Connotations

CHAPTER # 28PLACE

KEY TERMS

PLACE Is concerned with the selection of "distribution channels" used to deliver goods to consumers

Distribution ChannelsThe institutions through which goods or services are transfered from producers to consumers

Logistics Management

involves "Physical distribution" n "Material management" encompassing the inflow of rawmaterials n goods

n the outflow of finished products

Just in timeaims to "produce instantaneously , with perfect quality n minimum wastage" + getting customer satisfaction

Customer loyalty is no longer to be taken for granted

The keyword of modern market place is Flexibility

SUMMARY

Functions Involved in Distribution Process Factors favouring Use of

Transportation Direct Selling

Stock Holding n Storage Intermediaries

Local Knowledge

Promotion Multi-Channel Decisions

Display

Industrial n Consumer Distribution Channels

Types of Distributors

Retailors Channel Dynamics

Whole Salers Vertical marketing sys

Distributors / Dealers corp marketing sys

Agents contractual marketing sys

Franchising administered marketing sys

Multiple Stores

Direct Selling Logistics Management

Advantages

Considerations in Choseing Distribution Channels Functions

Direct / Indirect Distribution Channels Organising

How far the manufacturing comp wishes to carry out Inventories

various marketing functions like Ware houses

Bringing buyers b sellers together Purchasing

Offering sufficient choice of goods Packaging

Forming a favourable opinion of goods Just in time

Distribution - Factory to Retail outlets

Maintaining adequate sales level Distribution n New Technologies

Aftersales service Changing ways of conducting business

Credit policy Mobiles

Maintaining acceptable price E Commerce

How many intermidiate stages shd be used Digital technology

Customers Cable n Digital Television

Product characteristics Internet

Distributor Characteristics DTRV

Competitor's Channel choice

Supplier characteristics International channels

Market Exposure required

Intensive distribution strategy

Exclusive ...............................

Selective ...............................

CHAPTER # 29PROMOTION

KEY TERMSPromotion is concerned with communication btw the seller n buyer.

Promotional Mix There are various communication mediums available to the org. In firms with a coordinated promotional strategy the activity

of the sales team will be supported n supplemented by a combination of other communication tools

This combination is reffered to as the Promotional Mix

Marketing theory suggests that a range of tactics is more succesful than "putting all ur eggs in one basket"

The sales person must b aware that it is not just "what is said" which has an impact.

"how something is said" communicates the sales person's attitude to customers

Sales Promotion are those marketing activities other than personal selling, advertising n publicity, that stimulate consumer purchasingand dealker effectiveness. Sales promotion includes displays, exibitions, n demonstrations

There is often a direct link btw sales promotion n short term sales volume

Merchandising Merchandising is concerned with putting the manufacturer's goods in the right place at the right time

Exhibitions n are events usually organisedby an outside agency or trade / professional association , that gather related industry players Trade Fairs together to communicate ideas , n hopefully generate new business

Advertising any paid form of non personal presentation n promotion of ideas , good or services by an identifiable sponsor

AIDA Model It is "hierarchy of effects model" Awarenes - interet - Desire - Action

Relationship is a new body of theory within marketing that changes the focus away from getting customers to keeping customersMarketing A sale is not the end of the process but distinctively the start of an orgs relationship with customers

Branding A brand is a Name, Term, Sign, Symbol or design intended to identify the product of a seller n to differentiate it from those of competitors

Trade Mark is a legal term covering words n symbols

SUMMARY

Promotional Mix Advertising

Org's promotional mix AIDA model

Sales Promotion Purpose of Advertising

Sales Literature Classification

Peronal Selling Informative advertising

Exhibitions Persuasive Advertising

Public Relations Reminding Advertising

Advertising Above the line n Below the line

Specific goals of an advertising compaign

Combining Promotional Techniques Role of Advertising in Industrial Marketing

Advertising's Fundamental objectives Awareness building

Sales Promotion objectives Comprehension building

Sales force objectives efficient Reminding

All these compliment each other Lead Generation

Push n Pull effects Legitimisation

Reassurance

Peronal Selling n Sales Promotion Planning a Promotional Compaign

Elements in Process of Personal selling Stages Involved

Sender Identify The Target Audience

Message Specify The Promotional Message

Channel Select Media

Receiver Schedule Media

feedback Set The Promotional Budget

Paying the sales force Evaluate Promotional Effectiveness

Agents on commission only basis Successful advertising

Salaried employees on salary with bonus Advertising Agencies

Sales Promotion Relationship marketing & Key Account management

Have more direct effect on usage than does advertising Auditing Fulfilment of customer Needs

Examples Typical factors to identify a Key Account

Consumer promotions Historic value of purchases

Retailer or Middleman Promotions Expected future purchases

Sales force promotions Other competitive factors

Industrial Promotions Extra Resources Devoted to Key account

Objectives of Sales Promotion Time

Finance

Merchandising procedures

Right place Hospitility

Right Time

Point of sale Material Branding

Reasons 4 branding

Exhibitions n Trade Fairs Branding Strategies

Advantages Family Branding

To visitors Brand Extension

To manufacturers Multi Branding

Trade Marks

Publicity n Public Relations

Sponsorships

Advntages

Technological Developments

CHAPTER # 30GLOBALISATION

KEY TERMS

Scarce Resourcesis a resource 4 which the quantity demanded at nil price would exceed the available supply

Scarcityis the excess of human wants over what can b produced

Choice is only necessary because the resources are scarce

Production Possibility Curve (PPC)PPC illustrates the need to make a choice about what to produce when it is not possible to have everything

Oppertunity CostThe cost of an item measured in terms of the alternative forgone is called OC

Absolute advantage A country is said to have an Absolute advantage in the production of a good when it is

more effecient than the other country in the production of that good

Comparative AdvantageThe law of comparative advantage states that two countries can benefit from trade when each specialises in

the industries in which it has lowest oppertunity cost

Here one has to decide if it would b cheaper to produce a good or to import it

Purchasing power parityThe PPP approach is to calculate an exchange rate based on the relative cost of purchasing the same basket of goods in 2 countries (eg price of 'big mac' in different countries)

Transnational environmentEach regional n national unit achieves global scale n influence within overall org by exploiting its

specialized competences on behalf of the whole comp. R & D etc may b centralized

SUMMARY

Economic Fundamentals Protectionism in International Trade

Limited Resources n Scarce Means Discouraging of Imports By GovtStudy the nature of Choices Objectives

what ll b produced To protect home market

what ll b consumed Political factors

who ll benefit from consumption Others

Methods

Production Possibility Curve (PPC) Tarrif Barriers

Non Tarrif barriers

Qty of B Indirect Barriers

Regional Trade Groups

Global Stratigic Management

Qty of A Globalisation

Oppertunity Cost Management Orientation

Ethnocentrism

Economics of International Trade Polycentrism

Absolute Advantage GeocentrismComparative Advantage Regiocentrism

Reasons to export ( Covered in chp 31 )Arguments against Specialisation Developing the Global BusinessMoney n Trade Expoting Ethnocentrism

Exchange Rate Risk Overseas Branch Ethnocentrism

3 Types of excahange rates Overseas production Ethno but low level

Fixed Insiderisation Polycentrism

Managed Global company Geocentrism

Floating

Purchasing power parity Designs for Global Businesses

Requirement 4 local adaptation n responsiveness

high low

Pressure to high Global env Transnational env

Globalise low International env multinational env

CHAPTER # 31GLOBAL STRATEGY

KEY TERMS

Undifferentiated Marketing

Differentiated Marketing

Concentrated MarketingExclusive DistributionSelective DistributionIntensive DistributionLogistic management

SUMMARY

The International Planning Process HR Issues

Reasons to Export Expatriates Vs Local Staff

Difference between Domestic & Intern Bus advantages & disadvantages

Cultural Factors HRM

Economic Factors Recruitment

Competitive Factors ( data availability etc) Career Management

Technological factors Appraisal scheme

Objectives - the starting point of planning Communication

Modelling Strategic Planning Process Culture n the Org

Preliminary Analysis & Screening Variety of Culture due to varied mambersAdopting marketing mix to target markets Corp Culture

Developing the marketing plan Management Culture

Implementation n Control Hofstede Model of National Culture

International Marketing Research Distribution (Placement)

Advantages Strategic importance of Distribution .......

Objectives Key issues in distribution

Strategic Questions for IMR Coverage n Density

Information Sources Channel Length

Human Sources Power n AllignmentDocumentary Sources Logistics

Direct Observation / Personal experience Distribution Channels

IMR Process Qualities of a good distribution channel

Monitoring Consumer trading Channels

Investigation Bus Trading channels

Research Buyer behaviour n Culture

Using IMR Data Product features ( affect choice )

Problems in IMR Competition ( indicate usual form of trad chanels )

Comp objectives in market

Modes Of Entering An Overseas Market Motivating Agents

Exporting ( Direct / Indirect) Methods

Overseas Production Difficulties

LiscencingDeterminants of Decision International Physical Distribution

Logistic managementStandardisation / Adaptation Services

3 broad types of marketing mix Reason 4 DevelopmentUndifferentiated MarketingDifferentiated Marketing Controlling Global PerformanceConcentrated Marketing What stds to b adopted?

Barriers to Standardisation Ways of establishing stdsEnvironmantal Variables relating to 4 Ps Local help

Economy International comparisonCulture Obtaing Performance informationCompetition Control of intermidiariesLaw

Products n Communication Social n Cultural BehaviourDemographic issues in overseas marketing

Study of population n their characteristicsBuying Patterns

Behavioural DeterminantsInhibitors

Socio economic statusFamily structure

CHAPTER # 32APPRAISAL OF OVERSEAS INVESTMENT DECISIONS

KEY TERMS

Political Riskis the risk that political action ll affect the position n value of a comp

Tax saving oppertunities may b maximised by structuring the group n its subsidiaries in such a way so as to take the best advantage of different local tax systems

Method of financing a subsidary ll give some indication of the nature n length of time of the investment that the parent comp is prepared to make

SUMMARYForms of Foreign Direct Investment Political Risk n Blocked Funds

Foreign Direct Investment (FDI) Govt may impose restrictions / BarriersNew startup investments Tarrif n non tarrif barriers etc Overseas subsidiary ( as discussed in chp 31 )

Wholly ownedPartially owned Strategies to limit Political Risk

Take over or Mergers Negotiation with host govt

Joint Ventures etc Insurance

Industrial Co-operations Production strategies

Joint Equity Contacts with markets

Alternatives to FDI Financial Management

Exporting Management structure

direct Exports

Indirect Exports Exchange ControlsExport houses To restrict the flow of Foreign exc into n out of Specialist Export mng Firms a country Govt may impose following restrictions

Complementary exporting Rationing the supply of Foreign exchLiscencing Restricting the types of transactions

International Capital structure Decisions Ways of overcoming Blocked Funds

Points to b considered while raising Finance 4 subsid High Transfer pricing

Equity policy RoyaltyDividend policy High Interest on Loans

Pattern of holding Management Charges

Borrowing policyWorking cap policy Taxation in Multinationals

Tax Planning

Currency risk in financing a subsidiary Foreign tax credits

Advantages of borrowing in same currency to avoid double taxation

Tax heavens

Factors influencing choice of Finance 4 subs

Local finance costsTaxation systemRestrictions on dividend remittanceRepayment schedules

Other factors to b consideredReduced systematic riskAccess to capitalAgency cost

CHAPTER # 33RAISING CAPITAL OVERSEAS

KEY TERMS

International Banks

International Banking Consists of

Transactions in domestic currencies with overseas organisations

Transactions that donot take place in Domestic currencies

Funds from overseas might b used by multinationals n other large orgs to finance fixed assetacquisition or working cap in domestic bus operatios

Euro Currency Marketsinvolve the deposit of funds with a bank outside the country of origin of funds

n relending these funds 4 a fairly short term (3 months or so) usually at floating rate

Euro Creditsare Medium - Long tem int bank loans which may b arranged by indv banks or by syndicated of banks

Euro Bondsis a bond issued in a cap markt denominated in a currency which normally differs from that of the country of issue

n sold internationally

Euro EquityEuro equity issue ia an issue of equity in a market outside the enterp's own domestic mrkt

Commercial Paperis a short term Fin Inst issued by a comp

In the form of unsecured promissory notes with a fixed maturity ( 7 - 90 days or even a year )

Issued in Bearer form

Issued on Discount bases (interest rate implicit)

Syndicated CreditsA credit in this context is a facility whereby a borrower can borrow funds when required but might infact not takeup

the full amount of the facility. This differs from a loan which involves an actual transaction 4 a specified sum 4 a

particular period of time ( int rates are usually high )

Multiple Option FacilitiesComprise a variety of Instruments through which comps can raise funds , These includes

Note issuence facilities

Revolving Underwriting Facilities

SUMMARY

Factors affecting development of Int BankingGlobalisationSecuritisation

DisintermediationIncreased Fore exch n int rate VolatilityDeregulation

Int Banks Assists Comps in Following Ways

Financing Foreign tradeFinancing Cap MarketsInt Cag mng servicesProviding local banking services

Trading in fore exch n currency optionsLending n borrowing in euro currency mrkt

Participating in syndicated loan facilitiesUnderwriting Euro bondsProv of advice n inf

CHAPTER # 34FINANCIAL CONTROLS WITHIN MULTINATIONALS

KEY TERMS

Treasurship

is a function concerned with prov n use of finance

Treasury Department

Setup by large comps to manage cash n foreign currency

Multilateral Netting

In case there are a large number of foreign currency transactions btw didd subsidiaries the obligations of diff subsidiaries may b

netted off against each other on multilateral basis........... Reducing cost of transactions

Float

Amount of money tied up btw the time when payment is initiated n the time when the funds become available 4 use in the

receipients' bank A/C eg where cheque is sent by post

Cash Management Services

Service provided by bank to its corprate clients, who can obtain the inf about their different bank accounts regularly

through computer terminal in the comp's treasury department , linked to the banks computer.

The company can then manage to move cash from one account to another n so can manage its cash poition effectively

Cash Pooling

A procedure whereby debit n credit balances held with the same bank by comps within a group are setoff against

each other so that int cost can b reduced

Usually it involves transfering all the balances in a dummy account at the end of each day

Role of Internationl Holding Company

The level of control exercised by holding comp ll depend on which decisions are the responsibility of holding comp

n which is that of the subsidiary

Best approach is the coordination with central holdin comp having the final say in major decisions but the local operations

having a substantial input in terms of providing inf n opinion

Returns From subsidiaries

Management of the parent comp must decide how the total profits of the group shd be divided btw the parent comp n each

of its subsidiaries, which is likely to depend on the transfer prices adopted n how the parent comp shd obtain the cash return

that it wants from each of its subsidiaries

Transfer price

is the price at which goods or services are transfered from one process department to another or

from one member of group to another

If cash mng is centralised in a multinational, each subsidiary holds only the minimum cash balance required

for transaction purposes , all excess funds ll b transfered to central treasury department

CHAPTER # 34FINANCIAL CONTROLS WITH IN MULTINATIONALS

SUMMARYTreasureship Short Term Investments

Includes provision of Temporary cash surplus may arise due toCapital Increase in profitabilityShort term borrowings Low capital expndituresForeign currency management High cash receiptsBanking Utilization of SurplusMoney market ivestment Keep cash in hand

Short term or Long term investment

Treasury Department Buy back shares

Dividend

Role of Treasurer Forms of Short term Investments

Corp financial objectives Bank Deposit

Liquidity management Stock exchangeFunding mng Long term debt instruments

Currency mng Short term debt instrumentsCorporate Finance Certificates of depositsRelated subjects Treasury Bills (IOU issued by govt)

Eligible bank bills

Centralised or Decentralised Cash Management B O Exchange

Advantages n Disadvantages Local Authority bonds

Commercial paperTreasury dep as Cost Centre or Profit Centre

Considerations in treating it a Profit Centre Role of Internationl Holding Company

Competence of staff Problems in Treatin sub as profit centre

Controls No Advantage of group level strategies

Availability of Up to date Information No optimal profit maximising behaviour

Mng attitude to risk Low manipulation of Global Oppertunities

Transfer pricing Difficulties of Coordination

Performance Evaluation Geographical differences

Different markets currencies n products

Payments Between Companies Political n economic RiskCheque Increased # of decisions to b taken

Advantages Disadvantages Lack of local knowledgeMeasures to reduce Float Lack of communication

BOE / IOU Low motivation 4 managers

Bank Drafts

Mail Transfer Returns From subsidiaries n Transfer pricingTelegraphic Transfer Basis Determining Transfer pricingSwift Standard costInternational Money Orders Marginal CostLetter of Credits Oppertunity Cost

Full costCash Management Services Market price

Market price less discountCash Pooling Negotiated price

Other factorsBusiness ethics Shd be consistent with overall aims of org

Problems Risk reduction objectivesDifferent stds of code of conduct Fund managementDifferent priorities in different countries Interests of Minority ShareholdersTax advantages may b taken as tax evasion Tax minimisationCulture

Discussed in detail in chp 11 Evaluation of Performance of Overseas OperationsUse of Financial statements

ProblemsCurrency to b used ?Economic envResponsibility reporting

Budget analysisMostly translatyed in parent comp language

CHAPTER # 35

MANAGEMENT OF INTERNATIONAL TRADE

KEY TERMS

Factoring

Is an arrangement to have debts collected by a factor comp, which advances a proportion of the money it is due to collect

it may also include administration of the client's invoicing, sales accopunting, n debt collection services

and credit protection ( insurance ) for the client's debts

Forfaiting

means provision of medium term finance for export sale os machinery for which the payment is to be made over an agreed

number of years. The term may also b applied to short term financing

International Credit Unions

are organisations or associations of finance houses or banks in different countries (in Europe)

having reciprocal arrangements for providing Instalment credit Finance

Countertrade

is a general term used to describe a variety of commercial arrangements for reciprocal international trade

or barter btw coms or other orgs in two or more countries

The common characteristic of counter trade is that export sales to a particular market are made conditional

upon undertakings to accept imports from that market

In some cases it might b the only way of getting an export order

SUMMARY

Methods For International Finance Export Credit Guarantee SchemesRisks of Intern Trade Objectives

Physical Risks (theft etc) Increase in International tradeCredit Risk ( due to low inherent risk )Exchange rate Risk Covering preshipment risks of exportTransaction Risk Types of Guarantee

Rewards of Intern Trade Post ShipmentMore growth potential ComprehensiveStrong product life cycle Selected market guaranteeRisk Reduction Preshipment financeEco of ScaleEarly warning of changes in env Counter Trade

Types of countertradeing arrangements

Finance for Foreign Trade BarterTime consuming (Dead investment) CounterpurchaseGreater chances of bad debts Buyback ( paying in the form of output of plant etc )

Methods of reducing investment in debtors OffsetDemand early payments Switch Trading (3 country investment)Advance against collection Why Countertrade?Documentary credit Countries lack commercial creditNegotiation of bills / cheques or Foreign exchange reserves

To boost developing manufacturing industriesAdvantages of using B O Exchange in Int Trade Political or economic policies

To obtain more orders or technologyReducing bad debt risk Problems

Export Factoring Cost misght exceed expectationsAdvantages Unrealistically high values

Prompt payments to suppliers Increased risk of cncellationOptimum stock levels Perishable goodsFinancing growth through sales Administrative problemsLinking finance to volume of sales Dispute on agreeing costsNo problem of Slow paying debtors Costs of CountertradeNo need 4 sales ledger dep Fees of specialist consultants

Forfaiting Discount or 'disagio' to dispose of the goodsParties involved Fees payable to any 3rd party

Exporter of cap goods InsuranceOverseas Buyer wanting Medium term cr Bank feesForfaiting BankAvalising Bank

Documentary Credit ( LC )International Credit Unions