The way a company’s managers should manage a company should largely be down to the business plan. However there are often external factors limiting a companies business, they may choose to solely benefit shareholders, but practically and legally they must provide some benefit to their employees and their customers to remain socially responsible and have a strong positive public relationship to remain profitable. An umbrella corporation may often have to make strategic decisions to combat potential problems well in the future. In the show Silicon Valley (external) the senior venture capitalist spends a lot of his time studying sesame seed markets in Myanmar and Brazil in order to profit in the future, this example (although fictional and a little overplayed) is a small look into the world of ensuring that profits are maintained and some of the crucial detail that must be taken into account.
The ability to assess the viability of consolidating corporate strategy is not only about turning a profit, but is also about financial and shareholder relations, the capability and flexibility of dynamic and slow moving markets, the technical ability of the employees and manufacturing capabilities as well as cost, the people and manpower involved and the risks undertaken at every stage.
Ensuring that a business has a strategic plan ensures that the company has direction and vision, companies that fail to innovate or differentiate could get left behind or never reach their true potential. A business must define the scope of its operations, how it defines its goals, then how it plans to achieve them, and finally, evaluate. Companies that fail to find a suitable corporate strategy could be left behind and not identify important challenges ahead of time and their current states failings such as their branding or vision.
Aspects a business should consider in corporate strategy.
- Brand appearance, awareness.
- Internal Culture
- Market Segmentation
- Product, Pricing, Placing, Promotion
- After sales
- Research and Development
- Growth Strategy
- Human Resources
- Product and Market Innovation
There are many techniques that businesses use to maintain a strategic advantage, such as Porters strategic matrix (external) and Ansoff’s matrix.
Many Businesses use IT to manage their accounts, documents and decision-making. It is, therefore important that Access Control be implemented in Organisations to prevent unwanted modification or prying eyes from being able to commit computer crimes, such as the ones outlined in the Computer Misuse Act. Using Access Control can prevent these people and operational staff from being able to modify information that otherwise is not their place to edit. Some common implementations of Access Control could be limiting the information available to a customer about Transaction Processing Systems or Management Information Systems not allowing Managers access to manufacturer prices.
Access Control in Strategic, Tactical and Operational Management
In order to implement these features a common method of maintaining strict control is through a permissions model, where it is outlined to the computer what permissions a login has access to, such that they are able (like a file system) to edit, read or write a file or piece of information. Here are some common examples of Access Control;
- A Supermarket Employee is not able to alter the price of products.
- A Manager is not able to create new users for a MIS (Management Information System).
- A DSS (Decision Support System) is not able to commit to a higher level of privilege without presenting documentation proving that that decision is possible, a good example of this could be a bank requiring an account number to confirm that the account is active before allowing the employee to make changes or a support agent requiring a pin from a customer before being allowed to view the customers details.
The three levels of control is a common (but not de-facto) model for systems management, however often these levels of tasks can become obscured by other factors. These tasks can often be divided up among IT departments in formal organisations, such as ‘Ops’ and ‘Licencing’. The use of Access Control can be used to coordinate effective ICT teamwork on large projects and in other departments, such as accounting.
Just In Time is a lean production technique, It involves ordering a product right as it is about to run out, but before the business has to stop manufacture, this allows a business to work effectively when creating a product that requires a lot of parts and accessories.
|Raw Materials||Work in Progress||Finished Goods|
| Bought from suppliers
Supplier may not be able to meet demand Supplier could not raise prices Used in assembly or as ingredients
Parts for assembly|| Not Sellable
Costs business money to make into product May be a slow process
Wine May cost staff hours if long time delays i.e. building houses|| Needs moving for social events
This table shows the disadvantages of holding stock at different levels of the stock control process.
Why hold stock?
- Fundamentally holding stock allows production to take place
- To satisfy customer demand
- As a precaution against delays from suppliers
- It allows efficient production
- It allows for seasonal changes
- It provides buffer between production process
Main influences on Stock
- The need to satisfy demand such as demand influxes or lower commodity prices.
The a need to manage working capital, stock control for example could mean a product is depleted without being replaced.
Risk of losing value, such as the stock market price. Food and vegetables such as flowers may also decrease in value over time.
Low stock levels
- Lower stock holding posts.
- Lower risk of obsolescence.
- Less capital tied up in stock. So the business is more liquid.
- Consistent with operating on lean production.
High stock levels
- Production is always fully supplied so there are never any delays as the product never runs out.
- Potential for lower costs by ordering in larger quantities.
- The business is better able to handle unexpected changes in demand or the need for higher output as they will have the stocks available.
Businesses just starting out have a generally low rate of success, 50% of businesses fail within the first two years. Some of the common causes of business failure are avoidable, however there are some examples that businesses may not predict.
Could Leadership Cause Business Failure?
Leadership in a business is vital to its survival, but failure to identify where they need to straighten up and fly right again could mean that a business is left behind, unable to correct it’s course.
- Loss of Control, Just short of divorce of ownership, an owner unable to make effective and authoritative decisions could mean that a business could start to lack innovation or a competitiveness that every business needs to get an advantage over competition. At the same time, an owner making too little decisions could also mean a business effectively has no leader, which in small business could be the difference between growth and decline.
- Overtrading could see a business go into liquidation, it is important that a business can fulfil its promise and deliver too customers and HMRC, if a business does not identify when it needs to have some liquid assets or a financial cushion, it could loose out on future repeat purchases. Bad leadership could be the root cause of overtrading, however poor management and/or communication could also make overtrading the determinate factor. Machinery breaking may also mean that overtrading orders that they can no longer fulfil could cause massive cash flow problems for a business
- Ineffective Expenditure could mean that a business could go quick. Inability to manage finance and good investments could see even the largest business fail. Even if a business does not invest in merit-less research and development, a lack of innovation or diversification in their products could also see them fail as a result.
- Poor cash flow could lead to insolvency.
- No profit made
- Margins are too high, not enough return.
- No Inflows, Product is not developed effectively.
- Pressure groups prevent business from making enough money or attract too much of a negative stigma.
- Interest rates mean business cannot afford premises.
- Business unable to move product as price is too high because ingredients are too expensive.
Business can also fail if they do not have enough profit,companies that can’t expand due to financial and logistical restraint, greed and overheads being too high could mean that a business is unable to continue trading.
- Business Administration – A management firm (usually accountants) come into a business in order to improve spending and save a business from collapse.
- Liquidation – Selling assets to cover costs. Usually as a last resort to pay debtors.
Common Business Failure
- Minimum wage has increased (living wage)
- Economy is bad (or not favourable)
- Inadiquate Finance
- Majour Bad Debt
- Inadiquate shareholder capital
- Employees are not getting paid, so stop working
- Greed or Theft
- Dominant sales from a now dead source
- Legal and Social Change
- Consumer Protection Laws
- Poor Management
- No Interest in Business
- Poor Idea
- Poor Execution
- Poor Tourism/Footfall