Unit 1. Corporate strategy. Centralization and decentralization. Planning and scheduling. The SWOT analysis.
Learning objectives_____________________________________________-----------
1. Define the concept of strategy
2. Explain the strategy vocabulary including such terms as mission, vision, aims and objectives, and control
3. Discuss the business cases when the authority is held by senior managers strictly and when it is delegated to people of lower level
4. Enumerate the advantages and disadvantages of centralization and decentralization
5. Prove the necessity of planning for the success of the company
6. Name types of planning
7. Describe the peculiarities of SWOT analysis
Terms to learn_____________________________________________
Strategy, mission, vision, aim, objective, target, goal, SMART, authority, decision making, hierarchy, centralization, discretion, branch, decentralization, chain of command, span of control, aggregate planning, scheduling, contingency, SWOT, subordinate
Pre-texts discussions
1. What analytical tools do you know?
2. Why is strategy crucial for every company?
3. What does SMART stand for?
Reading______________________________________________________________
Text I. Corporate strategy
S trategy is mastering a set of formulae or analytical tools, which can be applied in order to guarantee success.
· Mission isa specific task with which a person or a company is charged. Effective mission statements often specify what the organization does, for whom and how, in order to distinguish it from its competitors.
· Vision or strategic intention is a desired future state for the organization (e.g., to be the leading supplier in its product or service category). Some organizations use the terms ‘mission’ and ‘vision’ practically interchangeably, but it is useful to make a distinction between mission as concerning current purpose, and vision as focusing on the future.
· Aims and objectives are interchangeable terms, butthere is a useful distinction between a general intention and the subordinate objectives, which support its achievement. Effective objectives are specific, measurable, agreed, realistic and timed – the famous SMART acronym.
Text II. Authority of managers: centralization and decentralization
Centrali z ation describes a situation where decision making authority is held predominantly by senior managers within an organization. Such a situation is common within smaller businesses where the owner/manager takes all the important decisions. Centralization is not only found in such organizations, as a number of very large organizations, such as banks and some large retailers, are also highly centralized. Little, if any, discretion is given to branch managers, who must simply run their branches in accordance with the procedures established by Head Office.
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Advantages of centralization are:
· Easier to implement common policies and practices for the business as a whole
· Prevents other parts of the business from becoming too independent
· Easier to co-ordinate and control from the center – e.g. with budgets
· Economies of scale and overhead savings easier to achieve
· Greater use of specialization
· Quicker decision-making – easier to show strong leadership
Disadvantages of centralization are:
· More bureaucratic – often extra layers in the hierarchy
· Local or junior managers are likely to much closer to customer needs
· Lack of authority down the hierarchy may reduce manager motivation
· Customer service does not benefit from flexibility and speed in local decision-making
Decentralization describes the situation where the authority to make decisions is delegated to people at lower levels of the organization. This often occurs where growth in size and increased complexity make the delegation of significant decision making authority necessary. Decentralization is a matter of degree and is usually present to varying degrees in most organizations. Effective delegation has benefits for managers, staff and the organization as a whole.
The advantages of decentralization are as follows:
· Specialization. Managers can develop more detailed and specialized knowledge by concentrating on a limited aspect of the operations.
· Timeliness. Quicker decisions are possible if it is not necessary to pass decisions up through the hierarchical chain of command.
· Motivation. Having authority to make decisions usually results in greater motivation and commitment and hence improved performance.
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· Human resource development. Less experienced managers can ‘learn their trade’ without their mistakes jeopardizing the entire organization.
· Organizational segment performance comparison. By dividing the organization into separate segments, it is possible to evaluate which aspects of operations are performing well and which are not.
The disadvantages of decentralization are as follows:
· Disfunctional decision making. It occurs where managers take actions which improve the measured performance of their organizational segment, but damage the organization as a whole.
· Loss of control. There is a danger that senior management may lose control of the organization, as they become far removed from the detail of underlying operations and unaware of the decisions being made by lower level managers.
· Increased cost of control. Costly management information systems may be necessary to monitor the performance of lower management levels to ensure that delegated decision making authority is being used in the best interests of the organization.
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