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anything about what behaviours are needed to produce that. For example, it could
be dependent on more advertising, cost cutting, moving-up market, withdrawing
certain products and from certain markets, spending on research and development
to invent new unique and popular products. If increased share price depends on
innovation then successful innovation becomes essential performance So, to where
do managers look to see what might be regarded as markers of performance?
The answer is that they must look to the organisations mission and its stakeholders
Performance management:
Once desirable performances have been defined, the next step is to manage it so
that individuals, cost centres, divisions and subsidiaries all work towards achieving
those behaviours and targets. This requires three steps:
(1) Design ways in which to measure the desired behaviours and achievements
(1) Measure them
(2) Provide suitable feedback
There can be many measures in a large company, but the most important are called
key performance indicators (KPIs). These are just what the name implies:
measurements, or indicators, of performance where the organization must do well if
it is to succeed. Achievement of the KPIs should be high on everyones agenda.
Goals and objectives:
Missions can be very grand and not very specific. Its all very well for a company to
say that it has quality as one of its mission, but what does quality mean? What
frequency and type of defect must be eliminated and which will be tolerated? By
when must a quality level be attained? Something more specific is needed.
Goals and objectives are often put together with no distinction made between them.
However, strictly speaking, goals are statements of general intentions (not that
much different to a mission), whereas objectives are more specific.
An example of a goal is: to improve profits
An example of an objective is: to achieve a Return on Capital Employed of 25%
within two years.
Good objectives should be SMART:
Specific: sales, rejects, cost per unit are all specific. Better and improve are not
Measurable: usually that the specific aspects of performance have to be quantified
Agreed/accepted/achievable: imposing an unrealistic or impossible target will be
ineffective
Relevant: relevant to the person responsible (ie they can affect it); relevant to the
organisations mission. If objectives are seen as irrelevant, arbitrary and merely an
exercise in
management power they will fall into disrepute.
Time-bound: objectives should be attained within a specified time frame.
Market share
Productivity
Product leadership
Personnel development
Employee attitudes
Public responsibility
They depend on:
Structure of the industry
Competitive strategy
Industry position
Geographical location
Environmental factors
Temporary factors
Functional managerial position
Classification:
Internal eg inventory control; delivery times
External eg exchange rates
Monitoring eg actual vs budget
Building eg targets to launch new products or updates
Johnson and Scholes suggested a six step process for developing CSFs:
Ethics
Strategic decisions cannot be separated from a consideration of the ethical
consequences of those decisions. For example, if management decides to close
down an operation, employees there will lose their jobs and there is an ethical issue
there. Similarly, starting to drill for oil in an area of natural beauty will also have an
ethical dimension. Ethics will have been comprehensively covered in P1. In P5, you
are simply expected to be aware that strategies can have ethical repercussions and
you should be able to discuss those at a relatively simple level. In particular
unethical; behavior can have serious financial
Consequences such as reputational damage, fines, compensation payments and
loss of trading licences.
Corporate Appraisal
Corporate appraisal is a critical assessment of the strengths and weaknesses,
opportunities and threats in relation to the internal and external (environmental)
factors affecting an organisation. The purpose is to establish the condition of the
organisation prior to preparing a long-term, strategic plan. The term Position Audit
is sometimes used as an alternative to Corporate Appraisal and sometimes used to
refer to an organisations internal factors. Corporate appraisal requires organization
to look at:
External (environmental) factors. These can be categorized as opportunities or
threats
Internal factors (resources and competences). These can be categorized as
strengths or weaknesses.
External factors can be assessed using PESTEL or a Porters five forces
analysis:
PESTEL
Political
Economic
Social
Technological
Environmental/ecological
Legal
Although organisations usually cant do much to change PESTEL factors, they might
be able to avoid threats (for example do not try to develop markets which
technology is likely to make redundant) or make use of opportunities (for example,
expand into a country that has become economically and politically attractive).
Pg no 15 till 21 of P5 pdf notes.
Ansoffs matrix
Ansoff s matrix is commonly used by businesses that have growth as their main
objective, and is used to focus managements attention on the four main alternative
strategic options available for growth, particularly profit growth ( here is a graph Pg
19)
Ansoffs matrix is very useful: in a simple diagram all classifications of growth
options are set out.
In general, staying with existing markets and products is a low-risk, low-return
strategy. Exploring new markets or new products will be higher risk and return.
Venturing into diversification might be sometimes seen as a sign of desperation:
what is driving an organisation to risk so much on the success of a radically
different business?
Strategic choice
Having carried out a corporate appraisal and having identified potential strategies,
it is then necessary to appraise them and formulate a strategic plan. The types of
techniques that may be employed in appraising the strategies are discussed in the
chapter on decision making