QUESTION 1:
Assume that you are the strategic planning manager of a new
organization. Discuss the factors that
you will put into consideration in formulating strategies for your
organization.
SOLUTION:
The factors to be considered in establishing strategies by an
organization will include the following:
a. The desired return on investment and other performance criteria
Normally all entrepreneur will have
in mind the rate of returns he expects from an investment. This may be in the form of revenue, prestige
or any other criteria with which to measure the performance of the organization
based on the objectives earlier established.
The desired return will be propelling factor in establishing strategies
for an organization.
b. The Scope Of the Strategy
This has to do with whether the
strategy is for short medium or long term; whether it is for a unit of the
business or it is for conglomerate and whether it is for a locality or to
covert previous area of operation. The
strategies to establish in each of these situations may of necessity differ.
c. The Industries To Be Entered Into:
This will have to do with the nature
of the industries, the complexity and the entry requirements. If an
organization wants to enter into a fully developed and complex industry, the
strategies to be formulated will, of necessity, differ from those required in
an infant industry, or an industry that is relatively simple in nature. Consider for instance establishing a
pharmaceutical industry and a poultry farm. While the requirements in terms of
legal and standards of operation for a pharmaceutical industry and its
complexity are more demanding than what a poultry farm and would entail, the
strategies for either of those businesses will have to differ.
d. Geographical Location:
Areas of concern here will be
nearness to raw materials and market. If
the raw materials are bulky for instance, producing near the source of raw
materials might reduce costs of transportation.
Distribution costs will be reduced, if production is near the market or
consumer or the product.
e. The Qualification of the Products to be Offered
Thing to consider here will be in the
areas of whether the products will be low price, low quality, special products
or products for special groups of people.
Will the product involve mass production or customized made product –
that is to specification and desire of the purchaser; will it be for the
purchaser; will it be for the rich; the poor or the middle class; will it be
for children, youths, adults or very old people?
All these factors will be put into
consideration in establishing strategies by an organization.
f.
The Role Of the Corporation in the
total Society
Society looks up to various
organizations for the provision of certain goods or services. These roles are
expected to be performed to meet the expectations of the general populace of
specific segments of society. Society
expects some organization to provide employment while making profits and so
contribute to the economic development of the nation. Others are; (i) The Occurrence of natural calamities such as earthquakes, cyclone etc.
and (ii) the basic actions in which the organization may want to engage.
QUESTION 2:
Organizations operate within and are affected by some
environmental factors. Discuss the internal environmental factors and how they
affect organizations. What steps do
firms take to overcome such effects?
SOLUTION:
Linkages between an organization and its environments.
Internal Environmental Factors:-
i.
Workers
An
organization depends heavily on the employees who are engaged to carry out the
activities of the organization. The
quality of personnel in forms of skill or expertise, experience and willingness
or otherwise of the workers to perform their duties efficiently could
contribute to the success or failure of an organization in achieving its aims
and objectives. The organization is
linked with the worker whether as individuals or as groups of individuals. The unions of workers, formal and informal
groups professional associations are the areas that should be of concern to the
organization. It is essential that an organization strives to attract and
engage competent workers.
ii.
The Shareholders
The
Shareholders of an organization are the owners and they determine the mission
and the policies for the organization.
The degree of understanding and cooperation among the owners, the
management and the other employees of an organization is very important for the
overall success of the business. Even
though the owners provide the capital and determine the mission for the organization,
the management and work have the experience which could be used to realize the
mission.
iii.
Tools, machinery and equipment:
The
availability of adequate working tools, machinery and equipment is very
essential for the performance of the activities of an organization. The workers
make use of these tools, machinery and equipment in terms of being modern or
obsolete, serviceable or broken down, sufficient in numbers required all vital
aspects to be given attention.
If an
organization had modern equipment and machinery as well as competent staff, it
will be able to produce efficiently to meet the desires of its customers.
iv.
Capital Base (Financial resources)
All
organizations need money for investment in capital projects and to meet
operating expense. The sufficiency or
otherwise of financial resources can contribute towards the failure or success
of an organization in achieving its aims and objectives. Money is needed for instance to establish the
business, to meet registration and operational rules and regulations, to
provide for overhead, or operating costs and for meeting other contingencies.
v.
Management Style
The style
of management adopted by an organization will affect is operations. The management style could be in the form of
autocracy, democracy or liazex faire. If
an inappropriate style of management is applied in any given situation, the
likelihood is that the best results will not be achieved. These internal environmental factors are to a
great extent, within the control of organization. It is therefore possible to formulate
policies and strategies to control such factors.
QUESTION 3:
You have been engaged as a consultant to evaluate the
performance of a manufacturing firm.
Discuss the essential factors you will consider in this exercise.
SOLUTION:
Performance Criteria
Various organizations are establish with different
missions. From these mission statement
the objectives of the organization could be derived. These objectives could include; i. Profit
Maximization; ii. Leadership in the industry; iii. Customer Satisfaction; iv.
Enhance Image for the Owner; v. To render assistance to the general public
Various criteria for assessing, an organization will include
the following:
i.
Return
on Investment
ii.
Sales
Volume
iii.
Capital
base
iv.
Rating
by the Stock Market
v.
Placement
in the Industry
vi.
Number
of Workers Engaged
i.
Return On Investment
The
level of profit made by organization particularly a business concern is a
criterion for assessing its performance.
When
huge profits are made, the divides to be declared to the shareholders will
equally be high. On the other hand, if
the profit made by an organization is low or no profits are made at all, this
translates to poor performance. The
return in this case will be low.
ii.
Sales Volume
The
volume of sales by an organization can be used to assess the performance of
that organization. By recording high
sales on organization will earn a lot of revenue from which to meet its
operating expenses and declare profits. This makes it possible for the business
to operate at full capacity and even expand its operations so as to meet the
level of sales. On the other hand, if
the volume of sales is low, the business will be incurring losses because the
revenue from the low sales may not be enough to meet operating expenses.
iii.
Capital Base
The
financial resources which an organization has for it various operation is often
used as a yardstick for measuring its relative strength and performance. Money
is required for investment in plant and other machinery needed for effective
operation. Funds are also required for
purchasing raw materials and other components parts and for meeting other
operating expenses. A deficient capital
base is a serious threat to a business.
iv.
Leadership in the Industry
Being
a leader in a particular industry is a mark of excellence. This placement makes the company to be
respected by both the competitors and the customers. Leadership position could be as a result of a
number of factors. These factors include
quality of product or service, pricing, market share or being the first comer.
Becoming a leader in an industry is an enviable position and often leads to a
fierce battle among key operations in an industry. A good example is the battle for leadership
by the three “biggest” Bank in Nigeria.
These are Union Bank of Nigeria Plc, First Bank Plc and United Bank.
v.
Number of workers engaged.
The
number of workers employed by an organization is related to the level of
operations and the degree of success of such operations. Successful operation by an organization could
lead to higher profits and expansion of the business of the firms. Such expansion could lead to engaging more
hands.
vi.
Stock Market Rating:
The effects
of the level of profits made and the stability of this operation usually affect
the value of the share of such organizations. A sudden dismal perforce by a
business firm result in loss of price of its share Stock Exchange Market. When the public have confidence in the
operations of an organization, resulting from the level of profits declared by
the firm, this confidence is normally expressed in the form of increased
valuation of the shares of such organization. On the other hand, some business
lose or record a fall in the price of their shares as a result of the reaction
of the public to the performance of such companies.
QUESTION 4:
Why do you think policies and strategies are important to an
organization?
SOLUTION:
The Concept of Strategy and Policies
Strategy Defined:
Strategy is been define as the art of
planning a campaign or large military operation, it has further been defined as
the art of managing an affair cleverly.
Policy has been defined as a planned or agreed course of acting usually
based on principles.
The purpose of strategy both in war
and peace is a future stable relationship with respect to the competitor on the
most favoruable possible terms and conditions.
The strategic decision is the one that helps determine the nature of the
business in which a company is to engage and the kind of company it is to
be. It is effective for a long time and
has wide ramifications. It is the most
important kind of decision to be made for the company. It requires the best
judgment and analysis that can be brought to it practice in making this
decision while still safe form most of the consequences of error is one of the
most important advantage offered by an education for business. In general terms therefore, the processes
involved in the efficient management of an organization include:
i.
The
conception of an organization’s purpose
ii.
The decision to commit an organization to
deliberately chosen purpose and
iii.
The
efforts required to achieve the purpose decided upon.
All these are the concerns of
business policy. Business strategy
determines how a company will compete in a given business and position itself
among its competitors. The pattern
resulting from a series of such decisions will probably define the central
character and image of a company, the individuality it has for its members and various
specification of particular objective to be attained through a timed sequence
of investment and implementation of decision and will govern directly the
deployment or redeployment of resources to make these decisions effective.
The need for Strategy
Christensen et al (1982) has noted
that the uniqueness of a good general manager lies in his ability to lead
effectively organizations whose complexity he can never fully understand, where
his capacity to control directly the human and physical force comprising that
organization are severely limited, and who he must make or review and assume
ultimate responsibility for present decision which commit concretely major
resources for a fluid and unknown future.
QUESTION 5:
The mission of an organization affects the strategies and
policies established by that organization.
Discuss this statement with particular reference to Blau and Scott.
SOLUTION:
Mission and Purpose – Mission provides the director for an
organization. The mission is normally
set by the top management of an organization or in some cases by the board of
Directors. The mission directs attention
to such issue as where are we going, what do we want to be achieved? The mission of an organization could be to
render services to people; to make maximum profit, product diversification; to
attain a large share of the market; or to be a leader in the industry. Mission is the primary consideration upon
which the policies and strategies of organization are based. Blau and Scott have identified four major
types or organization according to the group which receives the greatest amount
of benefits from the organization’s existence.
These groups are discussed below:
i.
The Business Concern
These
are business organizations which benefit the owners, the employees most of
those who transact business with them. The primary aim of a business concern is
to make profit and declare dividends to its owners, pay adequate salaries and
allowance to its employee and meet their obligations to their customers. Example of such organizations are Level Brothers, Nestle Foods, Cadbury and
PZ.
ii.
Mutual Benefit Association
This
is an association that benefits the members themselves. Such an association offers goods and services
exclusively to it members. The main
objectives is to cater for the welfare of its members and not necessarily to
make profits. Such associations are
usually made up of similar interests.
Examples are Social Clubs and
associations like Island Club, Ikoyi Civil Service Club etc. They are usually voluntary organizations.
iii.
Service Organization
These
are organization that render services to those who require such service. These organization are established to render
satisfactory services to those who may require such services. In the process, they may make profits.
Examples are health education
institutions. Schools and hospitals
are built to provide services to those who require such.
iv.
The Common Weal Organization
This is an
organization that benefits society in general; such organization are not
established for a section of the society, neither are they the members only nor
are they for those who can afford such services. They are not established for profits making. Examples are the Police, Civil Defence and
Fire Services. On the bases of the above
objectives which are derived from the mission of the various organization
discussed, the organization establish their policies and strategies, it will be
expected that differing mission would result in varying strategies.
QUESTION 6:
Owena Bank was operating successfully as a commercial
bank. As a result of some problems the
bank began to make losses and was heading towards total collapse. Discuss and evaluate the strategies
established by the bank to save it from collapsing.
SOLUTION:
This Owena Bank Plc was one of the indigenous and government
established bank, it took off with high hopes.
As a result of various problems ranging from interferences on management
faulty recruitment and poor banking attitudes, the bank was heading for total
collapse. Here is the text of the case
study.
Owena Bank Back from
the brink of collapse.
By 1992, it had become clear that the management of Owena
Bank Plc had lost grip on things and that the bank was heading for total
collapse. From a profit before tax of
about N2.9 million in 1991, it plunged into a loss of about N11.7 million in
1992 and about N215.8 million in 1993.
Under a new management, some visionary performance driven
changes were made in the operations of the bank. Some far reaching restructuring which reached
its watershed in 1993 was undertaken.
Management returned to the path of prudent credit risk management. The result was a profit before tax of N43.9
million in 1994.
The strategy to turn the bank around in the THREE PHASES – In
Phase One, we took the knife to the organization in a major Surgical Operation
which exercised terminal problems in our staffing, assets, procedures, culture
and attitude. In the SECOND Phase, we
have convalesced sufficiently from surgery and are establishing and
re-acculturating into new skills, attitudes and values, with emphasis on
productivity and the operational approach.
In the dispensation, we are to develop a ravenously concentrated view of
the customer as the KING and focus on all our activity. The objective will be to provide total
quality in our service and to do it right the first time (and every time).
In our Third and next phase, the ASCENSION phase, we will
take the battle to the fore front of the industry. Our objective is to become one of the leading
FIVE banks in Nigeria in terms of prudently acquired profitability and return
to our stakeholders. To nerve our
fighting arm for the ascension, we will acquire customer focused
technology. To this end we will be
putting to the market in early 1996, a new equity issue already approved at the
last shareholders meeting.
QUESTION 7:
(a)
Discuss
the distinguishing characteristics of objectives set by private and public
sector enterprises.
(b)
How
do these differences affect the policies and strategies of such enterprises
SOLUTION:
Difference between Private and Public Enterprises
Private Enterprises – These are firms owned by
individuals or group of individuals. The
primary objective of such enterprises is to make as much profit as
possible. The capital is provided by the
individuals themselves and they share the profits or bear the losses as the case
may be. Such enterprises are managed by
proprietors themselves or by a board of directors appointed by owners. Private enterprises are very common in West
Africa. Such enterprises vary
considerably.
Public Enterprises-these are business firms owned by
government. The owners may be federal,
state or local governments. The
government provides the capital for running them. Usually the primary objective of such
enterprises is to provide the goods and services at reasonable prices, and not
necessarily making the highest profit possible.
Public Enterprises
versus Private
Business Objectives: - The non-profit objectives of public
enterprises differ in many respects from those of private business
enterprises. These objectives tend to be
more tangible and subjective than the objectives of private business
enterprises which are measurable. A
government agency may have as one of its objectives as the promotion of a
balanced development of the economy.
This goal is capable of various interpretations by different
people. It is also difficult to
measure. The objective of an education
foundation may be to promote the quality of graduate study and research. But what are the yardsticks for measuring the
quality of graduate study and research?
Business objectives are measurable in terms of sales volume,
level of profits, share of the market enjoyed by the business. As a result of the differences in the
objectives of public and private enterprises, the policies and strategies
developed by such organization do differ significantly.
QUESTION 8:
Discuss the divestment strategies adopted by UTC Nigeria
Plc. What lead to the adoption of such
strategies by UTC. Evaluate the
strategies.
SOLUTION:
U.T.C divestments from major subsidiaries has been chosen for
the purpose of applying strategies by a business conglomerate as a measure to survive
the effects of the macro-economic environment.
The case is as follows; - U.T.C Nigeria Plc, a leading conglomerate is
to divest from three of its subsidiaries and also rationalize its main
operations into only four core areas because of the adverse effect of the
macroeconomic environment on its operations. The subsidiaries are Area Metal Containers
Ltd, in which it holds 54.8% equity, Henrich Schroeder (W.A) Ltd. Domain long and Amalgamated Engineering Ltd,
in which it holds 60% of its equity while it will dispose UTC Aluminum and
restructure the operations of its motor division among others to reflect
current realities in the operating environment.
The managing director of the company, Mr. Kole Funsho said in
Lagos sometime in the past that the measure become imperatives to refocus the
company towards fewer but high-value-added process and service businesses. Under the new strategic refocusing, the
company is to concentrate on food which includes animal husbandry and meat
processing, bakery, fast food, vegetable farming and processing and automotive
batteries.
Funcho said the restructuring exercise would enable the
company rationalists business to eliminate drains on its earnings and cash flow
reduce its branch network to cut cost, reduce its debt profile to a tolerable
level, dispose assets that were surplus to its operating requirements and
recapitalize the business for growth. The company’s diversification from
trading concerns in the 1980 led it to a lot of activities and businesses in
its search for strategies and in a bid to dominate all significant steps in the
value chain of business.
The current difficulties in the operating environment have
however left the company with some weaknesses of the strategy as the
development has overstretched its financial and managerial resources. Funsho said, in order to reposition the
company successfully, the Board and management would ensure that staff and
public have a clear vision of their future direction and evolve a key
management focus among others.
QUESTION 9:
Discuss some of the external environmental factors in the
present Nigerian economy. How do these
factors impact on the performance of businesses.
SOLUTION:
External Environment Factors
The external environmental factors are not under the direct
control of an organization. Such factors
can affect an organization’s activities and an organization can also influence
such factors. These factors are enumerated
thus:
a. Government policies and legislation:
In an attempt to control the
activities of various participants in businesses and to protect the interest of
all parties, government makes some rules and regulations. Such legislations could be on fiscal and
monetary policies, industrial safety, labour relations, environmental
protection, wages, price and employment and consumer protection. These
legislations affect businesses one way or the other but the laws are expected
to be obeyed. To enforced compliance
with government legislations, various agencies have been established. Examples
are NAFDAC, Customs and Excise, the Police Force, Standards Organization of
Nigeria and Corporate Affairs Commission.
It is the responsibility of
individuals and organizations to familiarize themselves with the various
legislation and comply with them.
Failure to comply has resulted in those concerned being penalized. Recall the experience of JECON, a
manufacturer of electrical bulbs which
fail to meet the standards set for such products and the closure of the
premises of the firm by government agencies.
The inability to meet the required
capital base for banks is one of the reasons for the withdrawal of the
operating licenses of some banks.
Educational and health institutions and factories are expected to meet
certain condition before they can operate.
b. Technology:
As a result of advancement in science
and technology, radical changes have taken place either in the machinery and
equipment used or in the technique of doing certain things. It is necessary for business operation to be
abreast of latest developments in technology.
Organizations have to know the new developments in technology acquire
the new machinery and equipment and should also endeavor to train and retrain
their workers in the modern ways of doing things. Failure to do these may result in the
organization being branched old fashioned and therefore rejected by its
customers or the organization may not be able to produce efficiently and
compete effectively with other producers.
For instance, with the introduction of the computer in banking
operations, banks that are unable to computerize their operations stand the
risk of losing some of their customers.
c. Competitors
Producers of goods and services
compete for materials, personnel, market and funds. The scope of the market in which these
competitors operate, the size and complexity of the market are of concern to
the individual operators. If the
competition is very keen, the likelihood is that only the strong actors will
survive. Many manufacturing industries
and financial institutions are adversely affected by competition in those
sectors. Consider the completion in the
beer and soft drinks industries.
Organizations are concerned about the present share of the market they
are enjoying and the desired placement in the future. In an attempt to protect its present share of
the market, a competitor may increase its after sales services, improve its distribution
channels and offer discount to its customers.
All these are aimed at working the competitors have an edge over his
rival.
d. The economy
The economic system under which a
firm is operating and the state of the economy are important factors to be
considered. The economic system could be capitalist, socialist or mixed. In the each of these systems; investment,
earnings and therefore profits and ownership of business will differ. Also, the economy could be in a healthy or an
unhealthy state. During the periods of economic boom, income levels are high
and so the demand for goods and services make a lot of profits. The reverse will be the case during a
recession.
e. Political Environment:
This has to do with the political
system and the type of government that is in power. The degree of stability in the political
environment is also to be considered.
When there is political stability, there is continuity in the leadership
and therefore in government policies.
This makes it possible for
organizations to be able to plan ahead for their future operations. If however if there is political instability,
there will be frequent change in leadership and in government policies. To
predict the future and make plans ahead will be very difficult. The investment climate will be unfavourable.
f.
Socio-Cultural Environment:
Organizations operate with some
socio-cultural environments. The
beliefs, norm, values and customs of the community within which an organization
is operating have to be taken into account if the organization is to operate
successfully. The product is services to
offer to the consumer in a particular locality and the overall activities of
the community.
g. Ecological Factors:
These have to do with the climate,
geological and other natural occurrences in the area where an organization is
located. Such features as the occurrence
of earthquakes, cyclones, erosion, or drought will affect the types of products
and services to offer in such area.
Extra precautionary measures may be required for locating and
establishing a business in area where the geophysical factors are unfavourable.
QUESTION 10:
Discuss the main characteristics of effective policy. And ii.
Enumerate and explain four (4) policies that the University of Abuja has to
ensure its effective operations.
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