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STRATEGIC MANAGEMENT AND BUSINESS

DEVELOPMENT

MANAGEMENT METHODS AND


TECHNIQUES
COURSE SUPPORT

2016

COURSE STRUCTURE
1. Management by objectives
1.1 Definition of the concept. Components
1.2 Methodology of the implementation of the management by objectives
1.3 Operationalization of the management by objectives
2. Management by projects
2.1 Definition of the system. The concept of project
2.2 Types of management by projects that are being used
2.3 Methodology of drafting and implementation of the system
3. Benchmarking
3.1. Benchmarking concept, areas of application
3.2. Unfolding of a benchmarking project
4. Dashboard
4.1 Dashboard concept, functions
4.2 Methodology of design, completion and delivery of the dashboard
5. SWOT analysis
5.1 SWOT analysis theoretical aspects
5.2 SWOT qualitative model
5.3 SWOT quantitative model
6. Break - even
6.1 Break even strategic indicator of operations flexibility
6.2 Ways to increase the operations flexibility
7. Work graph of the manager
7.1 Definition and objectives of the wor k graphs
7.2 Stages of development of a work graph
8. ORTID technique
8.1 Presentation of the technique
8.2 Methodology of application of the ORTID technique and the managerial situations
in which are recommended its use
9. Product Management
10. BCG Matrix Method used to ground the organi zation strategy

1. MANAGEMENT BY OBJECTIVES
Bibliography
Verboncu I. - How do we manage? Methodological Guide for Managers, Tehnic
Publishing House, Bucharest, 1999, pp. 178 - 188

1.1 Definition of the concept. Components


The most complex and widespread management system at global level, the
management by objectives, conceived and tested in the US in the 60s, consists of
splitting the company's objectives to the level of the performers and linking the
rewards / sanctions with the results obtained from the achievement of the
objectives.
Therefore, the trinomial OBJECTIVES-RESULTS-REWARDS / SANCTIONS
represents the cornerstone of implementation and use of this important
management tool.
The components of the management by objectives are the following:
a. The system of objectives, which includes fundamental objectives,
objectives derived of first degree, objectives derived of second degree,
specific objectives and individual objectives;
b. The action programs, in which are highlighted the main decisions and
actions to be taken and initiated to achieve the objectives;
c. The calendars of deadlines, which specifies the interim and final
periods for the achievement of the objectives;
d. The instructions, general or partial, resulting in methodological
guidance on how to achieve the objectives;
e. The budgets, drafted for the company and its components, approached as
management centers;
f. The methods and management techniques, usable in the context of the
management by objectives, namely: diagnosis, delegation, session,
dashboard, budget management etc.

1.2

Methodology of the drafting and implementation of the


management by objectives

The scenario of operationalization and use of the management by objectives


passes through more stages. We mention that in their presentation was taken into
account the possibility of using other systems, methods and management
techniques, including budget management, in an evolved version, which is the
most important.
I. Establishment of the fundamental objectives
A first stage is meant to determine the fundamental objectives of the company,
of which implementation depend both present and especially its future. As
examples, we mention: the increase of the profit with a certain rate, the
implementation of investments worth ., the improvement of the
competitiveness through .., the modernization of the system of
management until the date of .., market penetration . etc.
II. Settlement of the other categories of objectives
The degree of splitting of the fundamental objectives leads to two aspects of the
management by objectives:
- the management by objectives focused on the team, characterized by the
splitting of the system of objectives up to the level of the specific ones;
- the management by objectives focused on the individual, in which the
objectives are established up to the level of position, namely individual
objectives.
Passing through the two stages provides the pursuit of the system of objectives,
in a pyramid vision, as highlights the model below.

Fig 1.1 System of objectives

Source: Verboncu I. How do we manage? Methodological Guide for Managers, Tehnic Publishing
House, Bucharest, 1999, p.181

III.

Drafting of the other components of the management by objectives

It is the case of the action programs, calendars of deadlines, instructions and,


especially, of the budgets, in which preparation, launch, execution and tracking
is involved the budget management, drafted and used in an evolved version.
1. Delimitation and dimensioning of the management centers
The management center is a procedural (activity, group of activities) or
structural (functional or operational departments) component, with high decisional
and powered autonomy, which has a budget of which implementation depends on
the quantity of the material rewards / sanctions.

As such, two important criteria of dividing into sectors the enterprise in


management centers can be used:
- Procedural criterion, according to which the management centers are
incorporated in significant activities or groups of activities (for example,
manufacturing, supply, sales, treasury, personnel).
- Structural and organizational criterion, which enables the establishment
of management centers at the level of some organizational subdivisions like
departments (sections and production workshops, functional departments,
auxiliary departments). It is recommended using this criterion.
The management centers can be:
- cost centers, characterized by the fact that these are only generators of
expenses, without which the products or services that give consistency to the
companys object of activity cannot be obtained;
- profit centers, characterized by the fact that at their level profit can be
recorded, as a result of marketing products and services.
Their dimensioning involves the specification of some constructive
parameters such as: the value of fixed assets, the area occupied, the installed
capacity, the number of operating hours, the number of employees.
2. Drafting and launch of budgets
In a strong participatory dimension, the Budgets department, together with the
heads of management centers develop the budgets, of which content is given by
the following four chapters:
- Objectives (physical production, commodity production made, costs,
number of employees, wage fund, labour productivity, cost of an operating
hour etc.)
- Costs (grouped by items of classic costs, cost elements or cost items specific
to the budget management in an evolved version expenses with raw
material, material, cooperation and inherent functioning).
- Revenue (turnover, production deducted from the management centers,
work in progress at end of period)
- Results (profit, loss)

IV.

Remodelling the decisional, informational and organizational


subsystems in accordance with the requirements of the achievement
of the objectives

Basically, the other managerial components are subjected to a complex


modernization process so as to create the conditions needed to sup port the
achievement of the objectives and other budgetary elements.
V. Coordination and pursuit of the achievement of the objectives
In this sequence, the budgets are carried out and pursued, at the level of each
management center. Regarding the coordination of the achievement of objectives,
it is necessary to have a harmonization of the decisions and actions of the leaders
of the management centers and, within them, of the managers and performers.
The pursuit of the achievement of the objectives involves recording and
operative transmission of the deviations from the allowed costs with raw material,
labour etc. in a selective manner, ensuring a full correlation between the degree of
aggregation of information spread vertically to the management system and
hierarchical position of its beneficiaries. The managerial tools used for that
purpose may be management by exception or dashboard.

VI.

Evaluation of results and reward of the employees

It is the final stage where the results are measured, the forecasted objectives are
compared and the appropriate motivational behaviour is adopted (stimulation or
sanction of the participants involved in achieving these objectives).

1.3

Operationalization of the management by objectives

Sequence 1
The fundamental objectives are taken over from the strategy and the policy of
the firm. These objectives refer to one year, one semester or one month, in
accordance with the temporary span of ongoing activities.
Sequence 2
The system of objectives is outlined, by deriving fundamental objectives up to
the level of specific and individual objectives.

There are involved all the functional and operational divisions.


The coordinator of the specific actions of these sequences in the STRATEGIES
and GLOBAL POLICIES department, as appropriate (the names can vary, but the
procedural content must be well established).
Sequence 3
The general budget of the firm is developed, with the chapters: objectives,
costs, revenue, results.
The coordinator of the actions is the BUDGETS department.
Sequence 4
There are separated and adjusted by measuring the management centers from
the initial and auxiliary production and administration.
The coordinator of the action is the MANAGEMENT department (or the
MANAGERIAL ORGANIZATION).
Sequence 5
The budgets are developed at the level of the management centers, through the
effective and active involvement of the BUDGETS department and of the leaders
of the management centers.
Simultaneously, it is underlined the level of operating costs on management
centers if it appeals to another way of costing than the classic one.
Sequence 6
The level of the approved cost of the products is determined according to the
methodology specific to the budget management, taking into account the costs with
direct raw material and the operating costs of the management centers involved in
the manufacturing of the product.
The coordinator of the action is the FINANCE-BOOKKEEPING department.
Sequence 7
The budgets on management centers are launched.
The coordinator of the action is the BUDGETS department.
Sequence 8
The budget implementation, which involves recording and operational
forwarding of the deviations from the approved costs with direct raw material and
direct labour.
The coordinators of the actions are the leaders of the management centers and
the budget specialists within these centers.
Sequence 9
The layouts specific to the dashboard destinated to the firm management are
filled in. These layouts include information about the results obtained from the
achievement of the objectives.
The general coordinator is the MANAGEMENT department.

Also, the actual costs of products and the achieved level of the budgetary
objectives are determined.
Sequence 10
The company determines the value of the material rewards/sanctions that are
going to be granted to the employees in accordance with the degree of achievement
of the objectives.
The coordinators of the action are the BUDGETS and the FINANCIALBOOKKEEPING departments.
A new version of the budget, available both for the company, and for its
management centers, resulted from the coupling of the management by objectives
with the budget management. This involves four chapters and, what it is very
important, a new way to highlight the costs, on two articles of reckoning:
- raw material and direct materials, half-finished, cooperation
- operating costs
Budget
No.
Crt
.

Specification

0
I.
1

1
OBJECTIVES
Physical production
(piece)
Turnover (thousands
lei)
Return (thousands
lei)
Commodity
production
(thousands lei)
Total working
time(thousands of
hours)
Wage fund
Directly productive
workers (thousands
lei)
The cost of the
production per hour
(of operating) - lei

2
3
4

II.
1

COSTS
Costs with raw
material and direct

Budg Updat
eted
ed
level level
2

Achieved
level

Differences
(+/-)

Table 1.1
%
Causes

2.1.
2.2.

2.3.

2.4.

3.
4.

III.
1.

2.
3.

4.
IV.
1.
2.

materials (thousands
lei)
Operating expenses
(thousands lei), from
which:
Expenses directly
allotted on
management center
Expenses allotted
according to the
surface
Expenses allotted
according to the
value of the fixed
assets x of the
operating hours
Expenses allotted
according to the
number of employees
Expenses of the
previous period taken
over as balance
Expenses received
from settlement from
other management
centers
REVENUES
Commodity
production made
(thousands lei)
Production in
progress at end of
period (thousands lei)
Expenses settled to
other management
centers (thousands
lei)
Turnover (thousands
lei)
FINANCIAL
RESULTS
Profit (thousands lei)
Loss (thousands lei)

Source: Verboncu, I. How do we manage? Methodological Guide for Managers, Tehnic Publishing
House, Bucharest, 1999, pp. 187 - 188

Further reading:
Nicolescu, Ov. (coord.) Systems, Methods and Organization's Management
Techniques, Economic Publishing House, Bucharest, 2000, pp. 189-209
Nicolescu, Ov., Verboncu,I. Management, Third edition revised, Economic
Publishing House, Bucharest, 1999, pp. 344-348
Zorlenan, T., Burdu, E., Cprrescu, Ghe. Organizational Management,
Economic Publishing Hose, Bucharest, 1998, pp. 581-584

2. MANAGEMENT BY PROJECTS
Bibliography
Verboncu I. - How do we manage? Methodological Guide for Managers, Tehnic
Publishing House, Bucharest, 1999, pp. 199 - 209

2.1 Definition of the concept. The concept of project


Management by projects is a management system with a limited period of
operation, which facilitates solving complex problems with innovative character by
specialists with mixed training, temporarily integrated in an organizational network
parallel to the formal organizational structure.
The project is characterized by:
- an objective well-established, precise, quantifiable or qualitative;
- temporal limit;
- singularity, meaning that the project does not reproduce identically what
already existed;
- a temporary micro-organization, which allows the achievement of the
objectives specific of the project.
The concept of project which is directly related to the title of this management
tool - has a special significance. Thus, projects are considered complex issues of a
strategic nature, such as:
- restructuring of the company;
- privatization;
- integral or partial revamp of the company;
- improvement of the assortment structure by assimilating new products;
- reshaping management;
- completion of some major investments.

2.2 Types of management by projects that are being used


2.2.1 Management by projects with facilitation (MP1)
The most simplified organizational formula of the management by projects
is that with facilitation (easing).
Basically, those who are directly involved in the completion of the project
are not relocated from the companys departments and the project manager is one
of them. Usually, the person appointed in this position is the head of the functional
or operational department with the biggest contribution in the development of the
project. His function is to facilitate the circulation of the information between
specialists, to suggest some ways of action. He does not control the means of
achieving and acts, usually, at the request of his superior. The authority on
participants in the project is missing, and communication with them is indirect.
It is recommended to choose the head (manager) of projects either from the
persons most involved in the project, or from the most credible heads of
departments.
2.2.2 Management by projects with individual (MP2)
The second organizational version management by projects with individual
responsibility has, as its main feature, the fact that the sole responsibility of the
quantitative, qualitative and temporal achievement of the project comes to the
project leader (manager). He has tasks, powers and specific objectives, directed to
the fulfilment of the individual objectives derived from (included in) the project.
The careful examination of this version reveals the following:
- the project manager is placed, in hierarchical terms, on a hierarchic level
found by the general manager. In other terms, the project manager reports
directly to the general manager, a situation confirming the special
importance of its role in solving the problem approached as project;
- the cooperation between the project manager and the functional and
operational departments of the firm takes place through specialists, members
of these departments, without their translocation on the time required by the
completion of the project. Practically, they remain holders of the executive
positions in such departments of the formal organizational structure and,
besides the tasks, qualifications and responsibilities of the positions they
have, they perform some tasks, qualifications and responsibilities of specific
character.
2.2.3 Management by projects with staff (MP3)

This organizational version is more complex than MP1, because it


operates with two major characters: the project manager and the project
members (team).
The latter must meet the following requirements:
- the project team has a lifespan equal to the duration of the project;
- the number of members has to be between 8 and 12, depending on the scale
of the project and the structure of the actions required for its achievement;
- in its structure enter specialists from inside and outside the firm, with a
heterogeneous training;
- their professional competence should be very high, enabling an active and
effective involvement in solving the problem which is the subject of the
project;
- the project team must work constantly with experts in formal operational and
functional departments, ensuring thus a high degree of foundation of the
solutions to the project.
2.2.4 Mixed management by projects (MP4)
MP4 is, undoubtedly, the most complex organizational version, but also the
most used of the management by projects due to its special constructive and
functional valences:
- for the completion of the project coexist the project management and the
team, each with well-defined roles in solving the project;
- between the project manager and heads of departments designated to
participate in the completion of the project is built a specific
organizational and informational network;
- another organizational network appears and manifests between the members
of the team and specialists from the functional and operational departments,
who were appointed to support the completion of the project.
The project manager
Is the person who is directly involved in:
- project planning (setting goals; establishing the rules of the game in the
relations with the formal structural components; foundation of the ways of
the achievement of the project; sizing of the resources that are to be used;
determination of the interim and final timescales);
- project organization (determination of the size and configuration of the
project team; specification of its role and of the role of each component;
setting of the tasks, qualifications and responsibilities by the job description

for the specialists of the project team; choosing of the most favourable
organizational formula for the quantitative and qualitative completion of the
project; ensuring of the filling and delivery of the dashboard; drafting of the
project budget and so on);
- coordination of the project team, in order to ensure bilateral and multilateral
communication with its constituents; organizing and conducting meetings
(sessions) to launch the project, during its implementation (including
meetings of creativity) and at the project completion;
- persuasion of the participants to complete the project;
- control-assessment of the project (checking not to exceed the prices and
deadlines of the project, of the quality counter and the budgetary control;
continuous and final assessment of the project; corrections etc.).
The project members or the project team must meet some requirements
related to:
- size a total of 8-12 persons recruited from within or outside the company;
- training the members of the team project must have a mixed training
enabling them multidimensional approach to the problem represented by the
project;
- duration is established for a limited period of a few months to 1-1.5 years;
- subordination is directly subordinated to the project manager;
- operation its activities are carried out on the basis of a budget and
timetable of deadlines in which are specified intermediary and final
deadlines for the achievement of the project;
- structural and organizational settlement outside the organizational
structure (matrix structure)

2.3 Methodology of drafting and implementation of the system


Stages:
I.

Definition of the project

The project, respectively the work, action, problem etc. very complex, of
innovative nature, it is defined from many point of view:
- specification of the main objectives;
- establishenment of the extension of the project;
- specification of the structural components involved in the completion of the
project (positions, functional and operational departments);
- specification of the duration of the project;

- establishement of the criteria for assessing the final results.


II.

The appointment of the project manager

The project manager has an extremely important task in the timeframe


requested by the completion of the project. Therefore, he must meet several
requirements of professional and managerial qualification in the sense of
possessing solid expertise, as well as proper managerial knowledge, capacities and
skills.
III.

Establishing the project team

The project team, composed of professionals with diverse training, recruited


from within the companys departments and outside the company, has a decisive
function in the project, hence the need the project manager to involve directly in its
establishment.
The member of the project team must prove to have special knowledge,
qualifications and skills. Therefore, engineers, economists, technicians, foremen
and workers will not miss, focusing, at the beginning of the project, on the
contribution of the specialists in research and design and, on its completion, on the
contribution of the practitioners.
IV.

Choosing the organizational alternative

The election of one or another of the organizational version of management


by projects is made according to:
- the scale of the project;
- the innovative aspect of the project;
- the completion period;
- the volume and complexity of work processes required;
- the volume, complexity and diversity of resources employed;
- professional and managerial qualification of company staff.
V.
-

Project budgeting

Objectives;
Costs;
Revenues;
Results.

VI.

Specifying the ways of control

A series of ways of control are used during the period of project


implementation, namely:
- the control of the compliance with the intermediary and final deadlines;
- economic control (compliance with the costs);
- quality control (exhaustive or selectively).
VII. Project implementation
It is the stage in which the material, financial and human resources allotted
to the project are combined, in the organizational specific version which was
chosen.
VIII. Completion of the project and dissolution of the project team
In the end, the results achieved are compared with the objectives of the
project and the project manager adopts the appropriate motivational conduct, in the
sense of stimulation or sanction of those directly involved in the project.
Afterwards, the project team is dissolved and its specialists will resume their
duties in the organizational structure of the company.
Further reading:
Nicolescu, Ov. (coord.) Systems, Methods and Management Techniques of
Organization, Economic Publishing House, Bucharest, 2000, pp. 209-223
Nicolescu, Ov., Verboncu, I. Management, Third edition revised, Economic
Publishing House, Bucharest, 1999, pp. 348-354
Zorlenan, T., Burdu, E., Cprrescu, Ghe. Organizational Management,
Economic Publishing House, Bucharest, 1998, pp. 392-395

3. BENCHMARKING
Bibliography
Scurtu, V., Russu, C., Popescu, I. Benchmarking. Theory and applications,
Economic Publishing House, Bucharest, 2006, pp. 15-22, 25-27

3.1 Benchmarking concept, fields of applications


Benchmarking is a continuous process of evaluation of products, services
and practices of a company compared to companies recognized as leaders in the
field, in order to help improve their performance in critical processes and areas
affecting competitiveness.
The main types of benchmarking according to the European Organisation
for Quality (EOQ):
- Benchmarking of performance (performance analysis);
- Strategic benchmarking (change of strategy);
- Benchmarking of process (key processes).
The priority areas for the implementation of benchmarking are: public
administration, health, education, scientific research, industrial activity, financial
and banking activities, IT, product development, online commerce, marketing,
human resource management, environmental protection, sale of products, small
and medium enterprises management, customer service, automotive etc.

3.2 Performance of a benchmarking project


Stages and phases:
I.
-

Planning
Documentation of the review process;
Establishment of the purpose of the benchmarking analysis;
Settlement of the criteria for the selection of the partners;
Identification of the target partners based on the criteria determined
hereinbefore;
- Establishment of the plan of collecting the preliminary data.

II. Collecting
- Identification selection of information sources on partners' processes;
- Selection from the partners identified in the planning phase only of those
that fit best with the purpose of benchmarking;
- Development of the tools for data collecting;
- Internal assessment of the tools selected for analysis;
- Contacting of the partners identified and request for their participation in
benchmarking;
- Selection of partners according to their interest for the proposed analysis ;
- Conducting the detailed investigations.
III. Analysis
- Comparing the performance of the organization with the performance of its
partners;
- Identification of the best practice;
- Formulation of the implementation strategy;
- Development of the implementation plan.
IV. Adaptation
- Implementation of the plan;
- Monitoring and reporting of the progresses;
- Systematization and recording of the methodology and information resulted
from the research in order to be useful to other studies;
- Development of a plan of continuous improvement.
For theoretical aspects and especially for the case study we recommend in
PDF format:
Dr. Ing. Viorel Scurtu Benchmarking. Tool of the innovation manager,
EURO INNOVATION MANAGER, S.C. AGPITT INVENT S.R.L., 2007
(Benchmarking module, attached to the course).
Further reading
Nicolescu, Ov. (coord.) Systems, Methods i Management Techniques of
Organization, Economic Publishing House, Bucharest, 2000, pp. 345-357
Verboncu I. - How do we manage? Methodological Guide for Managers, Tehnic
Publishing House, Bucharest, pp. 236-240

4. THE DASHBOARD
Bibliography
Mereu, C., Decision Simulations, Course support for master, University of
Piteti, 2004
Verboncu, I., Dashboard. Theory, Methodology, Application, Tehnic
Publishing House, Bucharest, 2001, pp. 23, 28-29, 31-34, 49 - 88, 94-170

4.1 The dashboard concept, functions


Verboncu I .(2001, p.23) defines the dashboard as a set of relevant information
regarding the results achieved in the managed field, presented in summary and
default form, and operationally transmitted to the beneficiaries. Various
informational situations some with statistical value must not be confused with
the informational situations associated with the dashboard, that are more synthetic
and suggestive to be used to serve to a selective information of the managers. The
information specific to the dashboard alerts the manager about how to achieve the
goals and about the causes of the deviations, being able in this way to intervene
whenever necessary.
For each decision-making level, the dashboard that aggregates relevant
information represents the support for the decision-making processes.
More precisely, the dashboard has the following functions (Verboncu, I.,
2001, pp. 28-29):
a) The function of informing the manager about the state of the field that is
led;
b) The function of warning about some unfavourable situations, about
some deviations from normality;
c) The function of assessing the results obtained in the achievement of
objectives and, implicitly, of the quality of the decisions made and the
actions initialized to their operationalization;
d) The decisional function, in the sense that pertinent observation,
operatively transmitted to the managers at different hierarchical
situations, provides the foundation and appropriate decision making.

There is no universal dashboard for managers. Each manager can adapt


different versions of dashboard in relations to the practical conditions within the
company and its field of activity.

4.2 Methodology of design, completion and delivery of the


dashboard
Stages (Verboncu, I., 2001, pp. 49-88):
I. Design of the dashboard
Regards the following aspects:
1.1 Establishment of the department or the team of specialists responsible for
the dashboard
1.2 Establishment of the objectives related to the design, completion and
delivery of the dashboard
1.3 Establishment of the attributions, proficiencies and responsibilities of the
departments involved in the dashboard
1.4 Determination of the information needs of the recipients of information
1.5 Specification of the indicators and other ways to measure the objectives and
results obtained (indices), as well as the ways to visualize them
The most common forms of visualization are (Verboncu, I., 2001, pp. 3134):
a) Tables of values
Table no.4.1
Objectives - results
No.

Name of UM
the

Level

Differences % Causes

Planned Accomplished

indicator
0

..

.
.
.
.

Source: Verboncu, I. Dashboard. Theory. Methodology. Application, Tehnic Publishing House,


Bucharest, 2001, p. 32

b) The charts, which help better illustrate the trend of some indicators or
indices within a certain timeframe
c) The mixed forms (tables of values associated with charts)
1.6 Design of the layouts used in the dashboard. These can be designed for
General Assembly of Shareholders, board of directors, general manager,
commercial manager, economic manager, head of operational department,
foreman etc.
1.7 Fixing of the flows and information circuits associated with the information
situation (vertical circulation of the information that supply the layouts
specific to the dashboard)
1.8 Settlement of frequency to fill and deliver the layout specific to the
dashboard. In the table below are some examples.
The frequency of tracking the information
Table no. 4.2
No
.

Type of information

Frequency
Daily

Fluctuation of the human


factor at the firm level

Weekly

Monthly

Yearly

Dynamics of the main


correlations at the firm
level

ICAIFSINS and IW I s
3

Dynamics of the sales


product........
Dynamics of the sales by
product groups

*
*
*

Dynamics of the sales at


the firm level

Dynamics of the stocks

Absolute and relative


market share in dynamics

Situation of the suppliers

Situation
customers

10

Situation of the new and


modernized products

11

Situation of the new and


modernized technologies

12

Situation of the studies /


management projects

13

Dynamics
of
the
investments at the firm
level

14

Cash- flow

15

Firms general budget

16

Physical production at

of

*
*

the

the firm level


17

Consumption of labor at
the firm level

18

Electricity consumption
at the firm level

19

Expenses with repairs at


the firm level

Source: Verboncu, I. Dashboard. Theory. Methodology. Application, Tehnic Publishing House,


Bucharest, 2001, pp. 94 - 170

II. Comparing the information requirements with the availabilities of


the current information system
It should be checked if the existing SI is able to satisfy the information
demands of the managers. If it is able, the information redesigning does not justify,
and, if not, it requires its redesigning after a well established methodology to bring
SI to the parameters requested by the use of the dashboard.
III. Completion and delivery of the dashboard
It is recommended sequential bottom-up approach in terms of the
completion of the information layouts and their delivery to the beneficiaries.
There are filled in and delivered the information situations for lower-level
managers (foremen, heads of workshops etc.), middle managers (operational and
functional heads of departments) and the upper management (executive managers,
general manager, board of directors).
There can be many ways :
a) each department delivers to the executive manager or general manager the
information requested;
b) a department (usually ORGANIZATION) is appointed to deal with the
centralization of information, the filling of the layouts specific to the executive
managers and general manager;
c) a person from a department or the assistant manager is appointed to make the
dashboard for the executive managers and general manager.
The dashboard of the general manager at strategic level must contain
information from the general external environment, specific external environment
and internal environment of the firm.

Information specific to the strategic dashboard


Table no.4.3
No.

Environments of the
enterprises

General external
environme nt

Types of information

Specific external
environme nt

Inflation rate
Average wage
Unemployment rate
Strikes at the main suppliers
Rate of exchange lei/ EUR
Monthly instalment of the loans
interest
Changes in utilities prices
Changes in taxes
Enterprise
development
funds
provided by the EU
Monitoring of the main competitors
and their market share
Gross profit ratio of the main
competitors
Back payments of the main
competitors
Operating result of the main
competitors
Financial costs of the main
competitors
Geographical areas of interest of the
main competitors
Claims of the main competitors
Substitute products and services
launched on the market

Inte rnal
environme nt

Gross profit ratio (Rb/CA,%)


Rate of operating result (Rex/CA,%)
Share of total wage costs in added
value (Ch St/VA,%)
Ratio of outstanding payments and
claims (Pr/Cr)
Labour productivity (CA/no. Of
staff)
Average wage in the enterprise
Bank accounts (lei and currency)
Recovery period of the claims
CR
365( days )
CA
Dynamics of sales in lei
Dynamics of product sales
Structure of fixed assets
Geographical
distribution
of
customers

Source: Mereu, C. Decision Simulation, Course Support for Master, University of Piteti, 2004

The ability to select the information relevant to the strategic dashboard is an


attribute of the performance management.
Further reading:
Nicolescu, Ov. (coord.) Systems, Methods and Organization's Management
Techniques, Economic Publishing House, Bucharest, 2000, pp. 453-475
Nicolescu, Ov., Verboncu,I. Management, Third edition revised, Economic
Publishing House, Bucharest, 1999, pp. 378-381
Zorlenan, T., Burdu, E., Cprrescu, Ghe. Organizational management,
Economic Publishing House, Bucharest, 1998, pp. 438-443

5. SWOT ANALYSIS
Bibliography
Bgu, C., Deac, V., Firms Strategy, Eficient Publishing House, Bucharest,
2000, pp. 76 - 96
Stncioiu, I., Militaru, G., Management. Basic Elements, Teora Publishing
House, Bucharest, 1998, pp. 240 - 245
Bcanu, B., Strategic Management Practices. Methods and Case Studies,
Polirom Publishing House, Iai, 2006, pp. 133 - 151
Russu, C., Albu, M., Diagnosis and Firms Strategy, Tribuna Economic
Publishing House, Bucharest, 2005, pp. 99 - 109

5.1 SWOT analysis theoretical aspects


SWOT analysis represents the most important managerial technique used to
understand the strategic position of a company. SWOT Analysis aims at
highlighting the strengths and weaknesses of the firm, as well as the opportunities
and threats resulted from its business environment. The strengths of the firm are
characteristics that it has compared with other firms, especially with competitors,
which provides an advantage over these. The weaknesses of the firm are
characteristics that lead to a level of performances inferior to its competitors. The
opportunities represent chances offered by the environment to the firm to
establish a new strategy or to reconsider the existing one (external positive factors
for the firm). The threats are situations or events that may affect unfavourably the
capacity of the firm to achieve entirely the set objectives (external negative factors
for the firm).
SWOT matrix of inventory
Table no. 5.1

Internal
environment

Positive

Negative

Strengths

Weaknesses

External
environment

Opportunities

Threats

Source: Russu, C., Albu, M.- Diagnosis and Firms Strategy, Tribuna Economic Publishing House,
Bucharest, 2005, p. 103

The collection of data in the four inventories can be done by the


brainstorming technique.

5.2 SWOT qualitative model


(Russu, C., Albu, M., 2005, pp. 99-109; Bcanu, B., 2006, pp. 139-142)
SWOT matrix interpretation sheet
Table no. 5.2
Strengths ( S )

Weaknesses(W )

Opportunities( O) I. ( S - O )

II. ( W - O )

Threats ( T )

IV.( W - T )

III. ( S - T )

Source: Russu, C., Albu, M.- Diagnosis and Firms Strategy, Tribuna Economic Publishing House,
Bucharest, 2005, p. 107

Settlement of the courses of action


Quadrant I (S-O) - Make the decision to invest in the boost of the strengths, in
order to capitalize to maximum the opportunities.
Quadrant II (W-O) Determine whether those opportunities are important
enough to be worth investing in transforming weaknesses in strengths. If so, avail
yourself of it for another strength or opportunity.

Quadrant III (S-T) - Determine whether it is realistic that the threat be overcome
by the forces of the organization. It is inefficient to maintain some strengths as
long as the environment does not provide any opportunity and it is adopted the
decision to withdraw from those areas.
Quadrant IV (W-T) - In an area of this type you have a serious and urgent issue
that can jeopardize the company's operation. Pay special attention to seeking
solutions to remove the threat.
The qualitative model allows a faster and more intuitive use, specific to the
small firms or organizations with unique individual decision maker.

5.3 SWOT quantitative model


According to Stncioiu I. and Militaru Gh.(1998, pp. 240 - 245) the generic
strategies are summarized in four quadrants, and the use of the model involves two
stages.

Fig. 5.1 SWOT model and overall strategies


I Growth strategies; II Propelling strategies under risk; III Containment
strategies; IV Strategies to overcome the weaknesses.
Source: Stncioiu. I., Militaru, G.- Management. Basic Elements, Teora Publishing House, Bucharest,
1998, p. 244

The use of SWOT quantitative model invo lves two stages:

- identification of the SWOT quadrant;


- formulation of the practical strategy.
Stage I Preparation of the tools for the organization of the judgements that
have the pattern of matrices of assessment of internal and external factors.
The preparation of the matrix for the assessment of the internal factors
(MEFI) involves the following steps:
a) identification of the internal factors which represent equally strengths and
weaknesses, on fields of strategic analysis:
- Commercial ability of the firm quality of the products launched on
the market; market share; distribution network; price policy; product
promotion;
- Financial capacity of the firm profitability; cash flow; indebtedness;
degree of self-financing; financial stability;
- The productive capacity of the company technologies that are used;
size production capacities; degree of use of the production capacities;
level of the production organization; staff experience; labour
qualifications;
- Managerial capacity decision-making system; information system;
motivation and innovation capacity; structural organization.
b) allocation of coefficients of importance Kj to the j factors with values
between 0 and 1 according to the influence of the factors on the firms
success, so that:
Kj = 1
j

c) assigning a score Nj to each factor with values between 1 and 4; Nj = 1


very weak factor; Nj = 2 weak factor; Nj = 3 strong factor; Nj = 4 major
strong factor
d) establishing internal global power of the firm PGIF:
PGIF = Kj Nj
j

Depending on the PGIF level, its potential is evaluated using the following rating
scale:
Rating scale of the internal potential

Table no. 5.3


PGIF

Firms potential

Between 1 and 2

low

a) between 1 and 1,5

very low

b) between 1,5 and 2

small

Between 2 and 3

medium

a) between 2 and 2,5

tendency to small

b) between 2,5 and 3

tendency to big

Between 3 and 4

high

a) between 3 and 3,5

big

b) between 3,5 and 4

very big

Source: Bgu, C., Deac, V., Firms Strategy, Eficient Publishing House, Bucharest, 2000, p. 81

The algorithm for drawing up assessment matrix of the external factors


(MEFE) includes:
a) identification of the main internal factors j:
- Opportunities of environment product diversification; increasing
domestic demand; expansion of the market; increasing export
opportunities;
- Threats of environment declining purchasing power; decreasing
sales prices; the threat of substitute products; the emergence of
new competitors; promotional activity of competitors.
b) the assignatation of the coefficients of importance Kj of the factors is
established as in the case of MEFE; higher coefficients are given to the most
important factors, no matter whether they are opportunities or threats for
business activity ( Kj = 1);
c) each factor is assigned a score between 1 and 4;
Nj = 1 the factor represent a big threat; Nj = 2 average reference to that factor;
Nj = 3 response over average of the firm; Nj = 4 the firm behaves appropriately
according to the given factor.

d) calculation of external global power of the firm PGEF using a similar


relationship with that of PGIF.
Since weighted score can range between 1 and 4, it is considered that the value
of 4 corresponds to some major possibilities for the company to respond to the
requests from external factors, capitalizing on growth opportunities and avoiding
dangers while a score of 1 indicates possibilities extremely small for the firm to
adapt to the environment. A value of 2.5 shows a capacity to adapt to request of the
external environment. Then will be fixed the quadrant of the SWOT level. The
position of the firm required by the results from the matrices MEFI and MEFE is
marked on the grid in Figure 8.6.
Stage II Specification of the practical strategy.
The generic strategies associated with the four quadrant I IV are defined in
the table below.

The major overall strategies of the complex firms


Table no. 5.4
Practical strategies

SWOT
quadra
nts

Generic
strategies

Name

Application
directions
- a market
segment

Focus on
I

Growth

Propulsive

- a product

Fusions and
acquisitions of
companies

- Peacefully

Horizontal
diversification

- In-branch

- Forcibly

- Conglomerate

II

in
hazardous
conditions

- Peacefully
Fusions and
acquisitions of
companies

- Forcibly

- Reconversion
Reorganization
III

- Sale of assets
- Closure of
factories

Constraints

Bankruptcy

- Temporary
close for
reorganization
Forced
liquidation
- Nationally

Joint Venture
- Internationally

IV

Overcomin
g of
weaknesses

Vertical
integration

- Upstream
- Downstream

Horizontal
diversification

Conglomeration

Fusion with
other firms

Peaceful
consolidation
with
similar
firms

Source: Stncioiu. I., Militaru, G.- Management. Basic Elements, Teora Publishing House, Bucharest,
1998, p. 241

Choosing the strategy related to that quadrant is a capital issue that is settled
by a group decision-making. The quantitative model is recommended in the case of
a group decision-making process specific to the large organizations.
Further reading:
Nicolescu, Ov. (coord.) Systems, Methods and Organization's Management
Techniques, Economic Publishing House, Bucharest, 2000, pp. 389-403
Russu, C. Strategic Management, All Beck Publishing House, Bucharest, 1999,
pp. 77-85

6. BREAK - EVEN
Bibliography
Mereu, C., Decision Simulations, Course support for master, University of
Piteti, 2004

6.1 Break even strategic indicator of operations flexibility


(Mereu, C., 2004)
Operation structure consists of: operating income (Vex) equal, usually, with
the turnover (CA), operating costs (Chex) and the operating result (Rex), according
to the formula: Rex = CA - Chex .
In terms of structure, in relation to the turnover, the operating expenses are
variable and fixed. Variable expenses are dependent on workload, while fixed
costs are theoretically independent of the workload. In part, the fixed expenses are
the result of investment decisions. Fixed expenses can be assimilated in a broad
sense to the concept of "idle" of the economic agent.
Mainly, the fixed expenses include: paying off; rents; general utilities (for
zero production); share of wage costs (in administration), research and
development, companys security, technological technology, conservation of
unused capacity; share of the costs of consumables (part for previsous current
activities)
The variable expenses include: raw materials, fuel, energy, spares, cost of
materials sold; repair services, collaborations, commissions, advertising, publicity;
staff salaries linked to the activity of manufacturing and repair; taxes linked to
production.
By definition, breakeven is the point where the turnover covers the
operating expenses and the operating result is null. Breakeven is also known

under the names of operational dead spot or critical turnover. The calculation of
the critical turnover takes into account the following set of ratios:
CA cr Ch ex
CA cr ChV ChF

RV

ChV
CA ref

CA cr R V CA cr ChF

CA cr

CAcr

ChF
where:
1 R V

- critical turnover;

CAref turnover of reference (usually of the last financial year);


ChV - variable expenses;
ChF

- fixed expenses;

RV

- rate of variable expenses.

In a narrow sense, referring to enterprises, the operation flexibility requires


the ability to maintain the financial equilibrium of the company, to sudden changes
in the external environment (market, inflation, rate of exchange, legislation, etc.).
The operation flexibility Fr in a narrow sense is given by
Fr 1

CA cr
CA ref

[1]

0 F 1

The values close to 1 correspond to the maximum flexibility and the values
close to 0 correspond to the minimum flexibility. The higher the flexibility, the
easier the company can endure the variations in the external environment (market,
inflation, rate of exchange). It is clear that to increase flexibility, the value of CAcr
should be as low as possible.

If we take into account the maximum production capacity of the company,


characterized by the maximum turnover, CAmax, and using the ratio:

CA ref c CA max

where

c level of the utilization of the maximum turnover, the relation [1] becomes
F 1

CA cr
c CA max

[2]

and represents the broad definition of flexibility. It can be said that flexibility of
exploitation is an essential condition for the firms to maintain on the market.

6.2 Ways to increase the operations flexibility (Mereu, C., 2004)


There can be identified three ways to increase the flexibility of exploitation,
whose influence will be analyzed separately, based on a reference case A.
Reducing fixed expenses
Increase of the flexibility of operation by reducing fixed expenses
Table no. 6.1
No.
crt.

Name

Turnover of reference

Case A

Case B

100.000

100.000

Fixed expenses

50.000

40.000

Variable expenses

40.000

40.000

Operating profit

10.000

20.000

RV

0,4

0,4

CAcr

83.333

66.667

0,6

0,6

0,167

0,334

Source: Mereu, C. Decision Simulations, Course support for master, University of Piteti, 2004

CAmax = 166.667
It turns out that a reduction in fixed costs by 20% leads to an increase of the
indicator of flexibilitytwice. In other words, if in the first case the firm cannot
survive without going into loss, than to a decrease in turnover by 16.7%, in the
second case, the same firm can support a market negative shock of 33.4% of the
turnover.
6.2.2 The increase of labor productivity and the reduction of materials and
energy consumption, effected by the reduction of the variable expenses by
20%. We analyze the influence separated on the reference case A.

Increase of the flexibility of operation by reducing variable expenses


Table no. 6.2
No.crt.
1
crtcrt.
2
3
4
5
6
7
8

Name
Turnover of reference
Fixed expenses
Variable expenses
Operating profit
Rv
CAcr
c
F

Case A
100.000
50.000
40.000
10.000
0,40
83.333
0,6
0,167

Case B
100.000
50.000
32.000
18.000
0,32
73.529
0,6
0,265

Source: Mereu, C. Decision Simulations, Course support for master, University of Piteti, 2004

Flexibility increased from 0.167 to 0.265.


6.2.3 The increase of the turnover by 20%
We analyze the influence separate din the case reference A.
Increase of the flexibility of operation by rise the turnover

Tabel no. 6.3


No. crt.
1
2
3
4
5
6
7
8

Name
Turnover of reference
Fixed expenses
Variable expenses
Operating profit
RV
CAcr
c
F

Case A
100.00
50.0000
40.000
10.000
0,40
83.333
0,6
0,167

Case B
120.00
50.0000
48.000
22.000
0,40
83.333
0,72
0,305

Source: Mereu, C. Decision Simulations, Course support for master, University of Piteti, 2004

Flexibility increased from 0.167 to 0.305.


If the management acts simultaneously, using the three ways to increase
the flexibility, we obtain the results shown in the table below.
Increase of flexibility of operation by the simultaneous use of the three ways
Table no. 6.4
No. crt.
1
2
3
4
5
6
7
8

Name
Turnover of reference
Fixed
expenses
referin
Variable expenses
Operating profit
RV
CAcr
c
F

Case A
100.000
50.000
40.000
10.000
0,40
83.333
0,60
0,167

Case B
120.000
40.000
38.400
41.600
0,32
58.824
0,72
0,510

Source: Mereu, C. Decision Simulations, Course support for master, University of Piteti, 2004

Flexibility increased from 0.167 to 0.510. In the case study presented hereinbefore,
the simultaneous reduction of fixed and variable costs by 20% and the rise of the
turnover by 20% lead to the increase of the flexibility of operation of 3.05 times!
Simple changes of the relation [1] lead to
F 1

ChF
(1 R V )c CA max

The basic structural condition at the level of the firm to increase the flexibility
of operation is:
ChF
minim
(1 R V )c CA max

The programs for the reduction of the fixed expenses are drawn up by the
department of strategic plan as coordinator with the contribution of the
investments, mechanoenergentic and finance-bookkeeping departments.
The programs for the reduction of the variable expenses are drawn up by the
department of organization and standardization of production with the contribution
of the technological departments. The programs for the increase of turnover are
drawn up by the marketing departments with the contribution of the prices
department.

Further reading:
Nicolescu, Ov. (coord.) Systems, Methods and Organization's Management
Techniques, Economic Publishing House, Bucharest, 2000, pp. 403-419
Stnescu, C., Ifnescu, A., Bicui, A. Financial and Economic Analysis,
Economic Publishing House, Bucharest, 1996, pp. 214-215

7. WORK GRAPH OF THE MANAGER


Bibliography
Nicolescu, Ov. (coord.) Systems, Methods and Organization's Management
Techniques, Economic Publishing House, Bucharest, 2000, pp. 447 - 451

7.1 Definition and objectives of the work graphs


The work graphs are tools available to managers through which they
organize, on different time horizons, the activity they are to perform, taking
into account:
- The specific character of the activity that is developed;
- The hierarchical level at which that respective leader is placed.
The objectives that are pursued by the building and use of the work
graphs are numerous. From these, the following can be underlined:
- A better organization of the management activity;
- Achieving a balance between the different categories of tasks;
- Carrying on the interventions in time and space, such as their purpose to
determine the success of the organization that is run;
- Making a productive atmosphere for labor, influenced by the style and
ordered and rational methods of work, which are promoted by that
respective leader;
- Cleavage of the intensity of attention for a series of activities;
- Possibility, incomparably better, to be able to use information resources
in time (most often in real time) and closely related to the issues that
must be solved;
- More objective assessment of how the activity of leaders of various
organizations (units) different organizations is developed.

7.2 Stages of development of a work graph


The stages of implementation and the measures hat must be taken to
ensure the efficient functionality of work are, in the main, the following:
a) Analysis-diagnosis or self-diagnosis regarding the use of working time,
especially by the research of the configuration of the use of time budget
for the relevant periods;

b) Interpretation of malfunctions arised from the analyses that are


conducted, determination of their effects and of the pauses that generated
them;
c) Separation from the organizational development strategy of the priority
issues for a certain time horizon;
d) Drawing up of the work graphs that take into account:
- Their use in a system enabling the execution of tasks, solving problems
and their interaction with superiors, with those who are on the same
management level and with collaborators within and outside the
organization (unit);
- Settlement of realistic deadlines, generally not very tight at the
beginning, because failing to fulfil on schedule some tasks can easily lead
to a demobilization in using work graphs;
- Careful determination of the timescales for which are being built these
work graphs;
- The development of a system for keeping up to date, completion,
correction of some tasks that need to be pursued to achieve them, caused
by disruptive influences from inside or outside the organization;
- Gradual outlining, based on successes and some inconveniences resulting
from the practice, of some graphs validated for a larger period of time.
This is about, of course, the framework of drawing up these graphs,
because their content will probably be different from one period to
another.
The improvement of such situations that would lead in the end to the success
of the organization of the leadership activity and elaboration of proper work graphs
should also take into account:
a) The need to organize the work at the arrival of the manager at his
workplace; noting the tasks to be performed, evaluation of a period of
time for the actions to be fulfilled, setting apart a period of time for
unexpected situations, ranking and grouping activities that need to be
carried out in order to provide both the promptness of interventions and
their similarity, thinking about the own activities to be made in
connection with the application of delegation of tasks and responsibility.
b) The obligation to reflect upon the work done at the end of the day,
namely: the fulfilment of tasks and the results that were obtained, the
careful rescheduling of the work started but not finished or of the
activities that were not started, the schedule for the following day, the
disturbing factors and causes that have generated them.

A possible variant of work graph is presented in the table 7.1.


Table 7.1

Day 1

Activities

Time available for study

7,00
7,30
8,00
8,30
9,00
.
.
.
24,00
The estimation of the time available for study
Source: Nicolescu Ov.- Systems, Methods and Organizations Management Techniques, Economic
Publishing House, Bucharest, 2000, p. 450

Analyzing the results obtained from the previous graph, the weekly
programs can be made, for example for study, as well as for other types of
activities that give a perspective of the essential concerns of the managers, as the
one below:
Table 7.2

Day

In the morning

In the afternoon

In the evening

Monday
Tuesday
Wednesday
Thursday
Friday
Saturday
Sunday
Source: Nicolescu Ov. - Systems, Methods and Organizations Management Techniques, Economic
Publishing House, Bucharest, 2000, p. 450

But it is useful to underline that, above all, the work graphs are needed by
the senior managers, because at this level the diversity, heterogeneity, significance,
complexity and importance of the tasks require a more rigorous organization of the
management activity. Furthermore, because at this level are prepared and made the

most important decisions, of whose quality depends on the success or failure of the
organization.
Of course, the work graphs are also required at the level of the other leaders.
As I have emphasized before, sometimes is necessary to connect, at least partially,
the content of various work graphs.
The main advantages of the work graphs are:
- Decrease of entropy of the systems led by focusing on vectors of
organization and order in various organizations;
- Achivement of superior results, that can be measured, due to the
fulfilment on schedule, of a high quality and optimizing the use of
various resources, due to greater rigor in management activities;
- Development of the managerial capacity to focus on the essential aspects
of the activity of the organizations.

8. ORTID TECHNIQUE
Bibliography
Nicolescu, Ov. (coord.) Systems, Methods and Organizations Management
techniques, Economic Publishing House, Bucharest, 2000, pp. 379 - 386

8.1 Presentation of the technique


The ORTID technique contains a set of processes used in the selection of
the problems the organization is facing, according to their importance, in
terms of the criteria represented by objectives, resources, transformation,
integration and development. The name of the technique comes from the initials
of the words: objectives, resources, transformation, intregration, development.
The settlement of the objectives is the starting point of the activity of every
firm, and their fulfilment involves the use of human, material, financial and
information resources and the implementation of some transformations
(changes) in the technological processes, in the products/services launched on the
market, in the work procedures and organizational management. The fulfilment of
the planned transformations requires taking a series of measures, which are
implemented through integration. The integration involves the analysis of the
possibilities of materialization, phasing of the actions of implementation,
experimentation of the measures. The achievement of transformation through the
integration of the planned measures aims at amplifying the results through the
superior employment of the existing resources, namely the development of the
firm. The development of the organization through the fulfilment of the objectives
and optimization of the employment of resources requires the settlement of a series
of technical, economic and management problems.
As a tool, the method uses an evaluation grid of problems, which is drawn
up by the assessment based on points allotted to them for each of the criteria
specific to the method: objectives, resources, transformations, integration and
development. The evaluation grid of problems can be presented as in the table 8.1.

No.
Crt.
0
1
2
3
4
5

The evaluation grid of the importance of problems


Table 8.1
Criterion
Problem
TOTAL
1 2 3 4 5 ... n
1
2 3 4 5 6 7 8
9
Objectives
100
Resources
100
Transformations
100
Integration
100
Development
100
TOTAL
500
SCORE

Source: Nicolescu Ov. - Systems, Methods and Organizations Management Techniques, Economic
Publishing House, Bucharest, 2000, p. 380

All the problems that must be solved will be put on the horizontal line, while
the evaluation criteria will be placed on the vertical line. To each problem, for each
evaluation criteria, is given a number of points, the maximum number being, for
example 100, in terms of the importance of the problem from the point of view of
that criterion, according to the following rule: the score varies directly proportional
to the value of the objectives, the possibilities of integration and the contribution to
development, and inversely proportional to the consumption of resources and the
necessary transformations. Summing up the points associated with each criterion,
the score for each problem is obtained and the problems will be solved in
decreasing order of this score.
The top-level manager is recommended to regularly use the ORTID
technique, at different intervals of time (as a rule three months, six months). As the
problems which represent priorities have been partially or entirely solved, it is
possible that the next problems noticed as important to advance becoming
priorities, or other problems, that were not noticed at the beginning or that have
become to manifest with great intensity in the stage that passed from the previous
use of the technique, to become priorities, their solving requiring the attention of
the management.

8.2 Methodology of application of the ORTID technique and the managerial situations in
which are recommended its use
The use of the ORTID technique requires the passing through the following stages:
1. Identification (of all) the problems that might affect the objectives established by the management of the
organization through its strategy and of the issues that could appear in the process of the optimization of the
use of the organizations resources. These problems turn into elements that can have a negative influence
on the capacity of the firm to achieve its objectives or to use efficiently the disposable resources.
2. The repartition of the identified problems in more categories: technical problems, economic problems,
management problems. As the case may be, these three categories can be subdivided, in order to group as
accurately as possible the problems that were noticed.
3. Establishment of the criteria depending on which the problems that must be solved will be assessed. The
criteria used by the ORTID technique are:
3.1 The objectives, namely quantitative and/or qualitative expressions of the purpose for which the firm was
founded and it functions. The establishment of the objectives represents the starting point of the activity of
each company. Depending on the coverage domain and importance, these can be: fundamental objectives,
objectives derived of first degree, objectives derived of second degree, specific objectives and individual
objectives.
3.2 Resources human, information, material and financial.
3.3Transformations namely the changes that must be made in the technological processes, products, work
procedures and organization management.
3.4 Possibilities of integration, namely of implementation of the transformations that were decided, based on a
set of methods and appropriate management techniques.
3.5 Development of the firm the execution of the changes through the integration of the the measures that had
been planned aims at amplifying the results by the superior use of the existing resources, namely the
development of the company.
4. The elaboration of The evaluation grid of the importance of problems.Pursuant to the previous stages,
this stage aims at building the Evaluation Grid that will have, on the horizontal line, grouped in categories,

all the problems that must be solved, and on the horizontal line, the criteria (as the case may be, even the
subcriteria) of assessment.The model of the grid is presented in the table 8.2.

No.
Crt.
0

Crite rion
1

Subcriterion
2

Fundamental objectives
Derived objectives 1
Objectives
Derived objectives 2
Specific objectives
Individual objectives
TOTAL
Human
Information
Resources
Material
Financial
Tehnological
Products/Services
TOTAL
Work procedures
Transformations Management
TOTAL
Application possibilities
Integration
Phasing of application
TOTAL
Experimentation of
Development
application
Application of results
TOTAL
TOTAL SCORE

Techniques
1 2 3
...n
3

Economic
2 3
...n

Managerial
1 2 3 ...n

11 12 13 14

10

TOTAL
15

100

100

100

100

100
500

Source: Nicolescu Ov. - Systems, Methods and Organizations Management Techniques, Economic Publishing House, Bucharest, 2000, p. 382

5. Allotment of the score for each problem and for each criterion, based on
the rules set (directly proportional to the relevance of the objectives, the
possibilities of integration and the contribution to the development of
organization, and inversely proportional to the resources consumption and
the necessary transformations) and summing up of the score on problems
(on columns).
6. Ordering the problems according to the decreasing values of the score
obtained in the previous stage, to start start their settlement. These
problems can turn into ways to accomplish the objectives of the strategy
or of other nature of the organization. On this occasion, there can be found
out the weight of the technical, economic and managerial problems on the
whole and which of these categories of problems take the first place in the
firm that is analyzed.
Simple and easy to use, if the organization has specialists in economic and
managerial problems, co-workers or assistants of the managers, the ORTID
technique is currently recommended in more managerial situations.
The ORTID technique can be used either for the settlement of the
priorities of the organization on the whole, although, in this case, given the
great variety of the problems, the allotment of the scores is difficult to achieve,
being necessary a very careful and detailed analysis of each problem in
correlation with each criterion and subcriterion, or for the settlement of the
priorities for a subunit of the firm analyzed, a situation in which both the
determination of the criteria and the allotment of the score and ordering of the
problems can be achieved easier, even by the qualified personnel from that
organizational subdivision (compartment, section etc.).
The ORTID technique is recommended to be used both on the occasion
of the drafting of the firms strategy and whenever appear various
problems that influence the activity of the organization and is necessary to
prioritize those issues, so that the appropriate distribution of the resources could
be made.

9. PRODUCT MANAGEMENT
Bibliography
Zorlenan, T., Burdu, E., Cprrescu, Ghe. Organizational Management,
Economic Publishing House, Bucharest, 1998, pp. 395-397
Nicolescu, Ov. (coord.) Systems, Methods and Organizations Management
techniques, Economic Publishing House, Bucharest, 2000, pp. 247 - 258
Basically, this method represents a version of the management by
projects, exclusively focused on the enhancement of the competitiveness of
some products or group of products of the organization.
The product management is defined as the set of processes and activities
carried on in order to maintain or enhance competitiveness of a product or group
of products by a manager whose is given, for this purpose, suitable tasks,
attributions and responsibilities (Zorlenan, T., Burdu, E., Cprrescu, G.,1998,
pp. 395-397).
The main stages in the implementation of the product management
method are:
1. Selection of the product or group of products that will be the
object of the product management. The decision for selection
belongs to the top management and aims at choosing the
significant products as regards the turnover, profit, rate of return.
The selection is based on the following criteria:
- serial number and the weight of the product (group of products) in the
total of production
- degree of complexity
- speed of obsolescence
- date of manufacture and the place in the life curve
- appearance, packing and distribution.
The analyses and, respectively, the selection are made taking into account
the products similar to those entering competition on the internal and external
markets. Product management will be applied only for the products fabricated in
large quantities, which have significant shares in the turnover and are highly
competitive.

2. Settlement of the objective aimed to be fulfilled. Depending on


the given situation, the top management can decide:
- Fabrication of a new product or redesign of an existing product (group
of products)
- Inclusion of an existing project in the production
- Modification of the distribution channels
- Contribution to the increase of sales volume
- The total expenses established for the implementation of the method
3. Selection of the manager who will be responsible for
implementing the method. Depending on the objective pursued,
this can be a specialist in the technical field when the design or
redesign of the product is intended - or in the commercial,
organizational fields etc. The selection will take into account not
only the profile of the professional training, but also an extensive
knowledge (10 years minimum) in the manufacturing or
marketing field, as well as leadership skills to inspire the team.
The following activities take place also in this stage:
- The settlement of the tasks, proficiencies and responsabilities which
fall on according to the nature, complexity and importance of the
objective
- The appointment of 2 3 responsibles of segments whose activity will
be directed by the manager and the assignation of the tasks,
responsibilities and proficiencies, accordingly.
On the whole, the product manager is subordinated to the manager of the
marketing department.
4. Elaboration of the partial strategic options regarding the
design, manufacturing and marketing of the product by the manager in
accordance with the global strategy of the organization. These options are
subjected to the analysis of the top management, being materialized afterwards
in the strategy of product policy.
5. Elaboration by the product manager of the structural
organization, information, decision-making and methodological changes in
the departments involved. These changes are also subjected to the approval of
the top management along with the procedures and the control terms for the
fulfilment of the objectives.

6. The periodical assessment of the products that must be


removed from manufacturing, of those which have become unprofitable as
well as the inclusion of new products in fabrication.

10. BCG MATRIX METHOD USED TO GROUND


THE ORGANIZATIONAL STRATEGY

Bibliography
Zorlenan, T., Burdu, E., Cprrescu, G., Organizational Management,
Economic Publishing House, Bucharest, 1998, pp. 280-281
Stncioiu, I., Militaru, Gh., Management. Basic Elements, Teora Publishing
House, Bucharest, 1998, pp. 245-248
The BCG Matrix (Boston Consulting Group) organizes various business
segments of the firm according to the criterion of the potential to generate
income and, through this criterion, can identify the segments with development
perspectives and those that must be eliminated or transformed. (Stncioiu, I.,
Militaru, Gh., 1998, pp. 245-248).
The division of the firm into domains is made by group of products or
activities. Mostly, is used the division into groups of products (that employ the
same raw material; manufactured with the same technology; traded through the
same distribution network etc.) of type SBU (Strategic Business Units). A
Strategic Business Unit is a significant segment of the organization which is
analyzed to set up the strategies of the organization to generate new business or
income.
The BCG matrix is developed based on two variables:
- Market growth rate (the growth rate of the analyzed business segment),
according to the relation:
Market growth rate =

Sales(t) -Sales (t-1)/sales(t-1)

Relative market share (market share):


Market share = Percentage of the market accounted by the enterprise
Percentage of the market accounted by the main competitor
In the figure10.1 is represented the elaboration of a matrix of BCG portfolio.

QUESTION MARKS

Low profitability
Need liquidity
Contribute to increase

STARS

DOGS

Low profitability
Do not contribute either
increase, or to profit

High profitability
Need liquidity bigger than
what they produce, to be able
to increase rapidly
Contribute to increase
CASH COWS

High profitability
Supply liquidity
Do not contribute to increase

Fig. 10.1 Strategic BCG matrix


Source: Stncioiu, I., Militaru, Gh. Management. Basic Elements, Teora Publishing
House, Bucharest, 1998, p. 246

The stars are the products that have high demand in the market and for
which the enterprise has a high market share. These are productive, that is they
bring benefits, but they do not always provide the necessary liquidity to finance
the investments that support their development. They need large expenses with
the advertisement, and the manufacturing costs stand high, because of the lack of
an extended experience in their production. When the demand starts to decrease,
the financial needs of the investments diminish and the products become sources
of liquidity and will be included in the products considered as Cash cows.
The quadrant Cash cows includes business segments in slow growth, mature
or in decline, which entail few new investments both in production capacity and
in the financing of the need of working capital. These are very lucrative
activities if the firm has a dominant position. They release a very important
financial flux that will have to be reinvested intelligently.
The Question Marks are represented by the products that are sold in
small quantities and, therefore, generate low income. The manufacturing costs of

these products are, generally, high, because they are produced in a small series,
so the fixed costs per unit are higher.
The profit generated by these products is low, so it is necessary for them
to be supported with returns from other products.
The Question Marks can evolve in two ways: either turning into Stars as
a result of capital injections, or entering the category Dogs and then leaving
the arena.
The Dogs are the products that can barely maintain in the race and most
often consume resources of liquidity generated by other products. The
businesses subjected to limitation or elimination are recruited from these
products.
Basically, an activity during its life cycle goes successively through the
four quadrants: at the beginning it is a question mark (launch phase), then
becomes a star (growth phase), continues its life as the cash cow (maturity
phase) that, in the end, to end lifecycle as a burden activity (decline phase). It is
important that any activity follow this path, with an extension of the state cash
cows, if it is possible, this being a successful way. Opposed to it, there is a path
to failure, when an activity goes directly from the question mark stage to the
dogs stage. The liquidity generated by the cash cows acivities will be initially
used to maintain and strengthen the position of the stars. The surplus will be
used to increase the market share of few question marks, carefully selected, to
transform them into stars. For dogs it is adopted a strategy of piece segmentation
to find the last subsegment that could be exploited and from where might result
substantial liquidity. If this strategy proves to be impossible, the idea of
investing in these products is tempting and, consequently, their reconversion into
cash cows. However, in the case of an activity in the decline phase, there is the
risk of not recovering the investments made and, as a result, a single strategy is
possibly more often strategy of abandonment. The development of these
strategies is strongly connected to the life cycle of product and business.
In consequently, the BCG strategy consists in maintaining a balance
between different activities that generate sufficient liquidity to provide the
financing of the development of the stars activity and the selected question
marks. It is about the necessity of the existence of a balanced portfolio of
activities.

In the figure 10.2 are presented three models of portfolio of activities

Fig. 4

a) Old portfolio

b) Young portfolio

c) Balanced portfolio

Fig. 10.2 Portfolios of activities


Source: Bgu, C., Deac, V. Firms Strategy, Eficient Publishing House, Bucharest, 2000,
p. 173

With all its deficiencies, the obvious usefulness of the BCG matrix is that
it offers a clear enough picture regarding the way in which the internal flows of
the firm with diversified portfolio of businesses must be directed, in order to
improve the competitive position of the firm by increasing its economic and
financial performance of the whole portfolio. But the inability of management to
use matrix may generate errors as the overinvestment in cash cows business, the
underinvestment in question marks (which impedes them to become stars and
and push them to blind spots), the dispersal of resources among too many
businesses and question marks instead of focusing them towards some with real
chances of becoming stars.

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