Contemporary issues in business guideline

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  • Introduction
  • Definition of a company

A company is an entity that has a separate legal existence from its owners. The owners of the company are the members or shareholders. Its legal status gives a company the same rights as a natural person meaning that a company can incur debt and sue.

A company is an association or collection of individuals, whether natural persons, legal persons or a mixture of both. Company members share a common purpose and unite to focus their various talents and organize collectively available skills or resources to achieve specific, declared goals (Dignam 2006).

  • Strategic Management Process

Strategic management process is the process in which business managers choose a set of strategies for the company or organization for achieving better results. Strategic management process is a set of rules by management to follow and also is a philosophical approach to business. It involves five stages that include; setting goals, analysis, strategy formulation, implementation and monitoring of the strategies. Goal-setting is the clarification of the vision of the organization that involves identification of both short and long-term objectives, the process of accomplishing the objectives and customizing the process for the staff (Hysell, (2007).

The analysis involves gathering information that is relevant to the vision and should focus on needs of business that would help it grow. In the formulation of the strategy, the resources are determined that would help the business to reach its objectives and goals and issues prioritizing in order of their importance. Strategy implementation is the action stage and is critical to every organization. Evaluation and control of the strategy involve measurements of performance, consistent review of both internal and external issues and executing corrective measurements.

A company’s stakeholders

Stakeholders are a party, group or individuals who are interested in the performance of a business or a company who can have the influence on the actions of the company.

  • Strategic capabilities used to satisfy stakeholder needs

Capabilities are the practices, infrastructure, personnel and technologies that are necessary for a process to work. A business needs to identify measures of performance, and the capabilities required. Stakeholder mapping involves identification of key stakeholders and their importance to the organization. Companies and businesses usually have to identify performance measures and the most important stakeholders to monitor how the business is meeting their needs. Major stakeholders in a company include investors, who typically want rewards regarding interests or dividends, return on investment and accurate reports, customers, employees, regulators of the businesses suppliers and joint-venture partners. Strategic capabilities include customer handling, planning and scheduling, procurement, manufacturing, distribution, and credit management.

  • Corporate Culture
    • Definition of corporate culture

Corporate culture is the behaviors, attitudes, and beliefs that determine ways in which employees of a company and management interact and handle external business transactions. They are the values and attitudes that characterize and guide a company’s practices.

2.2 Importance of understanding culture

Every company has its ideologies, values, and principles. The culture dictates ways in which employees interact at their workplace and can affect their motivation and loyalty to the management. A healthy culture at workplace promotes healthy competition between two or more employees which motivates employees to perform at their workplace. Every company has a set of guidelines for its employees, and the culture represents predefined policies that act as a guidance tool to the employees by giving them a sense of direction. The culture is unique to each business or a company, and, therefore, it plays a vital role in creating the brand image of the company. The identity of a company is usually as a result of the work culture. It is necessary for the employees to fit in the corporate culture for them to perform well. The corporate culture creates a common platform that treats all employees equally and neglects nobody. The corporate culture brings unity to the company by enabling employees who are from different families, backgrounds, and varying mentalities to work together (Abraham Stanley, 2012).

Therefore, they achieve a common goal e.g. certain businesses have a culture that requires every employee irrespective of his/her residential area to step into the workplace in time that in long term encourages punctuality and improves performance. A corporate culture also creates a platform where healthy relationship thrives amongst all employees, and this molds individuals into successful professionals. A good corporate culture cultivates a habit in each employee that would make them successful in the workplace. It should extract the best performance out of each employee e.g. in a corporate culture where the company is very keen on reporting, however busy; the employees would send the reports by the end of the day.

3.0 Research Methods

Research can be classified depending on the knowledge it creates, research topic, user group or research methodology, etc.

3.1 Types of research methods

The qualitative research method is detailed and exploratory. It involves using research tools such as survey, observations, and interviews. Quantitative research involves quantifiable data by generating numerical data into meaningful statistics. Correlation or regression analysis determines the relationship between variables. Meta-analysis determines the impact of several different studies on the hypothesis.

3.1.1 Strategic change analysis

Strategic change analysis includes industry analysis, business strategy analysis, strategic evaluation, critical issues, and recommendations

3.1.1.1 Why strategic changes necessary

Strategic change in management is necessary for that helps to achieve the required business outcomes, goals, and objectives of the business and to bring change in the social infrastructure of the business.

3.1.1.2 The types of strategic change

A change in a company can be as a result of internal or external factors. Structural changes are as a result of an adjustment to emerging technologies or trends and being at level with competitors. It involves changing the overall purpose, mission or strategy, goals of a company or business. The main types of structural change are strategic, processes, people and the entire structure of the organization (Robert, 2009).

3.1.1.3 The conditions for strategic change

Changes in internal and external environmental factors are usually the main causes of strategic change. An external environment such as climate, economy, technology, political, legal, competitors, and media drives changes in the structure of a business. Internal environmental factors such as organizational culture and structure, human resource, physical assets, management, profits and cash flow may lead to structural change.

3.1.1.4 Stages of strategic change transition

The first stage involves the process of developing a strategy through clearly articulating a quantifiable vision in a time-frame. The second stage involves translation of the strategy into an execution framework. The third stage involves alignment of the organization to fit the new strategy. It requires employees to work together as a team and accept change. The fourth stage is planning operations where the strategy becomes fully integrated into the organization’s processes such as financial, planning, operational and management processes. The final stage involves monitoring, learning, testing and adapting to the new structure.

3.1.2 Evaluation of Company Strategy

Strategy and competence of the managerial leadership play a crucial role in determining company’s failures or success. In making a strategy evaluation, the strategy has to have internal consistency, consistency with the environment, appropriateness in the light of available resources, a satisfactory degree of risk, appropriate time, horizon and workability.

3.1.2.1 Acceptability

A good structural change should be acceptable at all levels that allow time to adopt the new processes of the organization.

3.1.2.1.1 Power dynamics matrix

It involves the combination of two or more types of structures in a business e.g. the functional and the project-oriented organizational structure. The power of a functional manager is from top to bottom while the power of the project manager is sideways. The matrix structure helps a business to achieve quicker market adaptation and higher efficiency.

3.1.2.1.2 Financial Risk evaluation

Financial risk evaluation measures the attitude to risk where the client’s knowledge on risks tests. The second evaluation is tolerance to risk where volatility measures and lastly the capacity for the risk that quantifies the ability of a client to take a loss or change. It also includes market value, credit risk, and liquidity risk.

3.1.2.1.3 Nonfinancial risk evaluation

These are actions or events that exclude financial transactions that can affect the operations of a company or a business negatively. These include retaining and hiring of employees, economic conditions, failure to meet growth targets, suppliers’ performance failure, death or injury of a worker or hardware/network connection failures. Non-financial measurements include model, accounting, legal, tax, sovereign, performance netting, key-man risks, operational and settlement risks.

  • Suitability

3.1.2.2.1 Blue Ocean strategy

According to Kim and Mauborgne (2005), Blue Ocean Strategy is a new strategic mindset and a new way of thinking that leads to a new direction to winning the future. The Blue Ocean strategy challenges strategies in competition and calls for a paradigm shift into new market spaces thus making competition irrelevant.

3.1.2.3 Feasibility

3.1.2.3.1 Profitability Analysis

Profitability analysis is a key part of ERP (Enterprise Resource Planning) that allows management to forecast or optimize profitability of a business (Flamholtz E. and Randle Y., 2011). There are four levels of margins of profits and include the gross profit, pretax profit, operating profit and net profit. The main objective is to forecast trends in earnings of a company and is an indicator of quality or growth.

 

4.0 Why companies fail

4.1 Reasons for inability to implement strategic change successfully

4.1.1 Death by planning

The management may fail to plan on how to implement a strategic change. As a result, the company is left behind in emerging markets or technologies.

4.1.2 Loss of focus

The company maximizes profits. Therefore, they may lose focus on strategy formulation. Loss of focus leads to failure in long-term.

4.1.3 Reinterpretation

Re-interpretation of a strategy may lead to loss of focus. The management needs to be clear on communication to ensure that all employees understand the strategy and work as a team. Communication breakdown leads to poor performance, lack of sense of direction and low motivation.

4.1.4 Disconnectedness

Disconnections from economic environments and changing customer trends lead to failure as customers will search for better value.

4.1.5 Behavioral compliance

Compliance with corporate culture in important e.g. arriving to work early. Non-compliance often leads to underperformance and low motivation to employees. New employees may also find it difficult to settle in a company that has no culture.

4.1.6 Misreading, scrutiny and resistance

There is often resistance to change as employees try to maintain status quo. Misjudgments from top management on employees may derail their morale. Over-scrutinizing employees may feel that they are of no importance to the company, and they may resign or underperform.

4.1.7 Broken agreement and violation of trust

Violation of trust between a company and its customers or suppliers often leads to failure reflected in revenues. A company should maintain a brand image

4.2 Examples and reasons behind companies that fail

Most executives of companies that fail have the traditional functional mindset that leads to failure in cross-functional expertise and efforts. Implementation of strategy often leads to resistance where employees try to maintain status quo that can result in underperformance. Business environments are very dynamic and inability to adapt to new or emerging environments leads to failures in the economy. A company should address the needs of the market before the structural change. Many companies have failed because there is no market need for their products. Lack of focusing on the strategy often leads to companies running out of cash and having huge debts that they are incapable of financing. A good strategy often requires a good team of employees who will be productive. Having a wrong team will often result in failure because of underperformance. Competition is usually the key to innovation and business growth. If a company gets outcompeted by rival businesses, then it is driven out of the market. Customers often reject overpriced and poor products or goods, and this could be as a result of mismanagement.

References

Abraham Stanley (2012). Strategic Planning: A Practical Guide to competitive Success. Emerald Group Publishing Limited. 2nd Edition, pp. 117-136

Dignam, A and Lowry, J (2006) Company Law, Oxford University Press

Flamholtz E. and Randle Y. (2011). Corporate Culture: The ultimate strategic Asset. Stanford Business Books 3rd Edition, pp. 35-67.

Hysell Shannon G., (2007). Company Planning for Small and Medium-sized Libraries and Media centres, Greenwood Publishing group. Vol. 27 pp. 23-87.

Kim Chan and Mauborgne (2005). Blue Ocean Strategy. Harvard Business Review, pp. 56-8

Robert T. Ochtel (2009). Business Planning, Business Plans and Venture funding – a definitive Reference Guide for Start-up Companies, The Carlsbad technology Group Inc., 1st Edition, pp. 45-97, 187-196.

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