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.
Capacity utilisation within a business can be easy or hard to calculate, for a printing shop, it is easy to calculate how many sheets they can produce per hour for example and in a metal fabricators, it is easy to calculate how many sheets of metal they can produce per hour, however for a company that has varied demand, it can be very hard to predict how much the business should utilise its capacity, a clearly noticeable example would be an understaffed restaurant, although they have staff working the shift, it is clear that they did not account for the demand that the customers require.
Capacity Utilisation = Actual level of output / Maximum possible output x 100
Productivity = Total output / Number of workers
Capacity utilisation should never be at 100%, as this could mean that if something were to fail, the business may not be able to fulfil the orders, Companies may choose to ask multiple ‘what if?’ questions that may indicate if the business may want to reconsider its utilisation levels.
- What if the employment rate fell?
- What if workers were too highly skilled?
- What if forecasts are not conservative?
- What if costs increased?
- What if minimum wage increased further?
The Impact on EU Trade Imports and Exports vs Capacity Utilisation
For UK Businesses, there is a handy acronym when working with exchange rates, SPICED. ‘ strong pound imports cheap, exports dear ‘. This applies to any companies in the UK who may wish to export or import goods from elsewhere.
If the UK were to leave the EU, the cost of imports/exports could be greater/lesser depending on the trade deals we could secure with countries.
- Specialised workers would find it harder to move freely into the UK.
- Tariffs are not imposed in the EU, tariffs could cost businesses money, however it could be argued that they increase competition.
- The Common Market could potentially be lost.
- The work ethic of some foreign national employees could change.
These factors could all affect the overall capacity utilisation of UK companies.