BUSINSS MANAGEMENT

STRATEGIC MANAGEMENT AND PLANNING 1 Objectives of organisation 2 Strategy Formulation 3 Planning & Control 4 Strategic management ; the traditional approch 5 Other models of strg manag 6 SWOT & GAP analysis 7 Performance appraisal & analysis 8 Missions Goals & Objectives 9 Mergers & Acquisitions 10 Corporate Reorganisation Strategic Management n Planning from ATFL Strategic Management n Planning from ACCA Case Studies CORPORATE SOCIAL RESPONSIBILITY &BUSINESS ETHICS 11 Ethics & Social responsibility 12 Corporate Governance HUMAN RESOURCE MANAGEMENT 13 Human Resources 14 Individuals 15 Training & Development 16 Appraisal & Career Management 17 Management & Human resource 18 Groups in Organisations 19 Strategy for Critical periods 20 Introducing Change ATFL Same Topic ACCA Same Topic Case Studies MANAGEMENT OF THE WORKING ENVIRONMENT 21 The changing environment 22 The Global Competitive env MARKETING MANAGEMENT 23 Evolution of Marketing Concept 24 Strategic marketing and planning 25 Maketing Research 26 Product 27 Price 28 Place 29 Promotion ATFL Same Topic ACCA Same Topic Case Studies INTERNATIONAL BUSINESS 30 Globalisation 31 Global Strategy 32 Appraisal of overseas investment decision 33 Raising Capital overseas 34 Financial control within Multinatonals 35 Management of International Trade ATFL Same Topic ACCA Same Topic Case Studies

TARGET DATE

DONE ON

CHAPTER # 1 OBJECTIVES OF ORGANISATION

KEY TERMS
Strategy
A Course of action, Including the Specification of Resources required, to achieve a Specific objective Stgy is a pattern of activities that seek to achieve the objectives of the org , & adopt its scope , resources & operations to env changes in the long run

Strategic Financial Management

Identification of possible strategies Capable of maximising an Org's Net Present Value the allocation of Scarce Capital Resources among Competing Oppertunities & the implementation & monitoring of the chosen strategy so as to achieve stated Obj

Financial Management
It is the management of fins of business i.e Fin Planning n Controll to achieve Fin Objs of Bus

Ecology

is the realtion of plants n other living creatures to each other

Stake holders invest in the effectiveness of a particular management team

REFERENCES
Jhonson & Scholes Cyret & March Granger Argenti Mendelew Characteristics of Strategic Decisions Concensus Theory 3 types of business objectives Various Objectives of Bus Stake holders mapping

SUMMARY
Characteristics of Strategic Decisions by J & S
Concerned with Scope of org's activities Matching org activities with SWOT Allocation / Reallocation of Resources Affect Long term n Operational decisions Affected by Env , Resourse capability , Values & expectations of management Have implications of change throughout the org Complex in nature

Objectives Of Business
3 types of business objectives Mission Corporate Objective Unit Objective Various Objectives of Bus Creation of Customers Servicing society Providing Employment Maximising Profit Granger

Argenti

Levels of Strategy
Corporate Business/Competitive Operational As per Argenti Obj Must be Expressed as Follows Identify the Beneficieries State Nature of Objective State the Size of Benefit Primary n Secondary Objs Hierarchy of Objectives Primary Corp objs Secondary objs Trade off Between Objectives Profitability not the best measure of objs Short term n Long Term Objs Multiple finanacial Objs Financial Objectives Main obj is to maximise wealth Fin targets Non Fin Objs Relationship between Fin n Non Fin Objs Green approach, Env Concerns etc

Determinants of Strategy
Stakeholders n Internal Coalitions Stake holder mapping Mendlew Level of interest Level of power General n Economic Influences External influences Nature of Business Org culture Economic Objectives Social Responsibilities CONSENSUS THEORY: Cyret & March Managers run a business but do not own it & that Organisations dont have objectives only ppl have Objectives emerge as a Consencus of differing stakeholders views n r not entirely contoled by managers Concept of Business Stake holders view Management view

Envirinmental Accounting
Eco Balance, Cleaner Technology, Corporate Libs, Perf Appraisal, Life cycle Assessment, Budgets etc

Financial management Decisions

Investment Decisions Take over, Merger, Divestment etc Manager has to Identify oppertunity Evalute it Decide on optimum allocation of funds Financial Decisions Long term ( Cap structure ) Short term ( Working cap ) Dividend Decisions

Objectives of Publically owned n Non Commercial Cos

Primary obj ------- not the maximisation of wealth but to contribute to national economy External financing limits Financial manageent 4 such groups is different coz they dont have competitors dont operate 4 profit decisons taken by polititions or civil servents

CHAPTER # 2 STRATEGY FORMULATION

KEY TERMS
Long Term Strategic Planning
Formulation , Evaluation n Selection of Strategies for preparing a Long Term Plan of action to attain Objs

Planning Horizon
It is the furtherest time ahead 4 which plans can be Quantified

Strategic Planning -- Anthony

It is the process of deciding-- on the objs of the org ,on changes in these objs, & on resources used to achieve these objective and the policies that are to govern these objs ( their acquisition , use n disposition)

Tactical or Management Control

It is the process by which managers assure that resources are obtained n used -- Effectively n Efficiently in the accomplishment of the orgs objs

Operational Control Control

It is the process to ensure that Specific tasks are carried out -- Effectively n Efficiently

Expansion
It is the Growth of Existing Products and/or Development of Exiating Markets

REFERENCES
Drucker Anthony 3 aspects of Strategic Planning Definition of Strategic Planning

SUMMARY
Business Planning
Managers performance usually measured in short term Fin Plan should : Have Quantified Targets Cover 3-5 or 10 years Be a part of Strategic Plan Advantages Identification of fin reqs Prospective use of surplus cash Plans 4 raising required funds Future profitability of comp Optimum utilization of resources Set stds 4 measuring perf Bottom up Approach Top Bottom Apoproach Growth Strategies Integration or Related Diversification Horizontal Integration new markets existing product new product existing market Vertical Integration Farward Vertical integ Backward Vertical integ Diversification or Unrelated Diversification Concentric Diversification New product with similar technology or market etc Conglomerate Diversification New product for new customers Withdrawl or Abandonment Merger & Acquisitions Organic growth vs acquisition Pricing Short term pricing Competitive bidding Strategic pricing Regulatory Frame work of Accounting

Long Term Strategic Planning

Drucker describes 3 aspects of Strategic planning making risky decisions with future considerations organsing systematic efforts to carryout these decis Measuring results of these decisions

Rational Model
Covered with chp 4

Strategic Fund management

Strategic Cash flow Planning Simillar to cash budgeting except: longer planning horizons Uncertain future cashflows Emergeny plans Consistent with other policies Effect of new investments Cash Rich Comps Risk Management Working cap management Selling off nonessential assets Changing dividend policy

Financial Controls Levels of Planning Strategic Strategic vs Tactical Tactical Tactical vs Operational Operational

CHAPTER # 3 PLANNING & CONTROL

KEY TERMS
Planning
It involves making choices between alternatives & is primarily a decision making activity

Control
It involves measuring & Correcting actual performance to ensure that the alternatives that are chosen & the plans for implementing them are carried out

Feed Back
The term can b used to describe both "the Process of reporting back control information to mng and the control information itself

Budget Center
Each section of an org 4 which a budget is prepared

Responsibility Accounting
It is a system of accounting that segregates Revenue and costs into areas of personal responsibility in order to Monitor n Assess the perf of each part of org

Responsibility Centre
It is a unit of an org , headed by a manager , who has direct resp for its performance

Controllable Costs
The items of Expenditure which can be directly influenced by a senior manager within a given span of time

Competitive Advantage
C Adv is a profitable n sustainable position that exists in the minds of Consumers who believe that the value they receive from a product/service is greater than both the price they pay n value being offered by competetors

REFERENCES
Porter & Miller Porter Porter Implications of IT on Competition 5 factor model 3 Generic Strategy to Achieve C Adv

SUMMARY
Planning & Control Cycle Planning
Identify objectives Identify potential strategies Evaluate strategies Choose Alternative Course of Action Implement Long Term Plan

Controllability & Responsibility Reporting

Steps in deciding a budget centre What shd b the B Centre? What inc , exp &/or Cap employment plans should each Budget centre prepare? Criteria for measuring performance Features of a well organised Sys Of Controls A hierarchy of Budget Centers Clerly identified Resps for achiving targets Resps for Rev, Cost n Cap employed Controllable n Non Controllable Costs Controllability of fixed costs Controllability n Apportioned Costs Controllability n Dual Responsibility Control Reporting Budgetary Planning n Control Systems Gen Obj is to ensure Communication , Coordination n Control in an org

Control
Measure actual resultrs Compare them with plan Respond to Divergence from plan

Actions taken on the basis of findings

Control action identify n correct the problem No Action when things are goin well Alter the Plan if results are not good n mng can do nothing about it

Feed Back Single Loop Feedback

Relatively small variations No change in existing plans Associated with budgetary controls & Std Costing

Using IT As Strategic Tool

As per Porter n Miller IT can change the nature of Competition in an Industry in 3 ways Change the Industry Structure Porters iderntified 5 competitive forces working in competitive env Threat of new entrants Bargaining power of suppliers Bargaining power of Customers Threat of Substitues Rivalry IT as collaborative Venture Electronic data Interchange Value Added Networks Creating New Business Be used to create Competitive Advantage Porters 3 Generic Strategy to Achieve C Adv Cost Leadership Differentiation Focus

Double Loop Feed Back

Higher level Feed back Ensures that plans, budgets, org structure & control sys are changed to met the changes in conditions

Negative Vs Positive Feed Back Feed Forward Control Risk n Uncertainity

Types of Risks Accounting 4 Risks Quantifying the Risk Decision Rules Decision Trees Managers n Stake holders Approach to risk

CHAPTER # 4 STRATEGIC MANAGEMENT - TRADITIONAL APPROACH KEY TERMS

Strategy - Jhonson n Scholes
The direction n Scope of an org over the Long Term which achieves advantage 4 the org through its configuration of resources within a changing env to meet the needs of market and to fulfil share holders expectations

Tactics
The deployment of Resources to execute an agreed strategy

Ploicy
A general statement providing guidelines for management of Decision Making

Strategic Management
The Development, Implementation & Control of agreed stgs There is more to stgy than merely deciding what u want to achieve and how u r 2 achieve it

Corporate Strategy - Jhonson n Scholes

It is concerned with what types of business the org is in. denoting the most gen level of stg in org

Business Strategy
How an org approaches a particular product market area

SUMMARY
Strategic Mng Involves Analysis Choice Implementation Control Defining Aspects of St Mng Scope of activities Env Resources Values Time Scale Complexity Strategies at Corp Business Unit Levels Operations Marketing R&D HRM IT / IS Finance Rational Model
Strategic Analysis Internal Appraisal Missions n Objectives Environmental Analysis SWOT Match Position audit with Environmental objs Strategic Choice Strategic option generation Evaluate options Strategy selection Implimentation Emboding The chosen strategy in corp plan

CHAPTER # 5 OTHER MODELS OF STRATEGIC MANAGEMENT

KEY TERMS
Competitive Strategy
Porter A Competitive Strategy is the taking of Offensive or Defensive Actions to create a Defendable position within an industry ----&---- a super return on investment

The Learning Org

An org skilled at Creating , Acquiring & Transfering Knowledge & at modifying its behaviour to reflect new knowlegde n insight

REFERENCES
Andrews Mintzberg Johnson n Scholes Herbert Simon Incrementalism Kenichi Ohmae Hofer n schendal Hamel n Prahalad Ohmae Porter Patterns n Competences Emergent Strategies Stgy n Managerial Intent Bounded Rationality Lindblom Strategic Thinking Environmental Fit Future Orientation Competition Competitive Strategy

SUMMARY
Patterns n Competences
Andrews Stgys are Patterns of Mng Decisions Stgy is exploitation of Competences Mintzberg Task of Strategic mng is to shape n control these strgys as they develop Implicit or Explicit Stgys 8 Styles of Stg Mng 5 Ps ( ways in which term stgy is used Plan, Ploy, Pattern, position, Perspective Crafting Emergent Stgy Johnson n Scholes

Environmental Fit

Emergent Strategies

Hofer n schendal Stgy a mediating force btw org n env Strategic Logic A proposed sequence of action must b consistent with orgs objs n env Hamel n Prahalad 2 suggestions Future is not some thing that just happens to org Orgs can create their future A Diagonostic to indicate how future Oriented a firm is Ohmae A good bus stg is 1 by which a firm can gain significant ground on its competitors at an acceptable cost Method: Readjust current resources Relative superiority Challenge Assumptions Degrees of Freedom Interplay of 3 Cs (Stgc Triangle) Customer Comp n Competition Porter Creating a sustainable stgc position 3 Assumptions of Ohmae n Porter

Future Orientation

Stgy n Managerial Intent

The Command View Paradigm n Politics Issue Awareness Issue Formulation Solution Development Solution Selection

Competition

Bounded Rationality

Herbert Simon Managers work till they find a tolerably satisfactory alternative Lindblom Small scale adjustments to past practices

Incrementalism

Competitive Strategy

Logical Incrementalism
Broad outlines of stgy are developed by an indepth review , with a scope for day to day incremental decision making

Learning Based strategy

Knowledge as resource Knowledger Creation The learning org Implications for stgy

Strategic Thinking

Kenichi Ohmae Stgy is essentially a creative process It Operates as follows Ask the right question Observe the problem Group Problems together

CHAPTER # 6 SWOT & GAP ANALYSIS

KEY TERMS
Corporate Appraisal
A critical assessment of the Strengths & Weaknesses, Oppertunities & Threats (SWOT Analysis) in realation to the Internal & Environmental factors affecting an entitry in order to establish its condition prior to preparation of long term plan.

Crucial Success Factors

are those factors that are fundamental to Strategic Success Jhonson n Scholes defines them as "those components of a strategy in which the org must exel to out perform competition

Gap Analysis
A comparison btw an entitys ultimate objective & expected performance of projecs-- both planned n undergoing

Forecasting
is the identification of factors & quantification of their effect on an entity as a basis 4 planning

Projection
is an expected future trend pattern obtained by extrapolation it is primarily concerned with quntitative factors while forecast includes judgement

Extrapolation
is a technique of determining a projection by Statistical means

Scenario
is an internally consistent view of what future might turn out to be

REFERENCES
Jhonson n Scholes Argenti Mercer Criticle success factor F0 Forecast Steps in Scenario Planning

SUMMARY
Strengths & Weaknesses
Apraisal identifies the following Shortcomings in present skills and resources Strengths the comp seeks to exploit Areas to look at include Marketing Products n brands Distribution R&D Finance Personnel Plant n Equipment stocks Role of Mng Accountant Cost effective programe Product analysis Product attitude survey Areas of Finance where weekness might exist Oppertunities in areas of Product Profitability

Flexibility-- Strength or Weakness SWOT n Criticle success factor Analysing the planning gap
F0 Forecast 4 stages defined by Argenti Errors in Forecast Profit Gap Other forms of Gap analysis Continuous Gap Analysis

Scenario Planning
Macro Scenarios Building Scenarios Steps in Scenario Planning by Mercer Industry Scenarios Using scenarios 4 formulating stgs

Oppertunities n Threats
What Oppertunities &/or Thrests exist? Competitors response to oppertunities Cos competitive advantage in opertunity How the thrests will affect mrkt

Combining The Elements of SWOT Analysis

Where strength matches opper - exploit position For weakness n threats - Corrective / Contingency plan Cruciform Chart

CHAPTER # 7 PERFORMANCE APPRAISAL & ANALYSIS

KEY TERMS
Contribution Margin
The difference between the sales volume & variable costs of those sales

Capital Projects
These involve any long term commitments of funds undertaken now in anticipation of a potential inflow of funds at sometime in future

ROI
Profit before int n tax * 100 / oprations mng cap employed A form of return on cap employed, which compares income with the operational assets used to generate that income

Return on cap employed

Profit before int n tax * 100 / avg cap employed it indicates the productivity of cap employed

Residual Income
It is a measure of the centres' profits after deducting a Notional or Imputed Interest Cost

Benchmarking
The establishment through data gathering, of targets & comparators, through whose use relative levels of performance (and particularly areas of under performance ) can be identified.

SUMMARY
Survival n Growth
Covered in chp 1 n 2

Benchmarking
Types of b marking Internal Functional Competitive Strategic Stages of Benchmarking B m Exercise as part of strategic Review J & Scholes - Questions 2 b asked Questions to b asked while selecting appropriate BM Basis Levels of BM Resources Competences in Separate Activities Competences In Linked Activities Advantages & Disadvantages of BM

Comparing Profit centre performance

Covered in chp 3

Contribution as Measure of Performance

Contribution n Strategic Decisions Entering the Market Breakeven Alanysis Questions to b asked Exit

Using NPVs to control Strategic Inv

Discounted cash flows

Devisional performance through ROI & RI

Reasons 4 makin ROI a Perf Indicator Financial Reporting Aggregation Different measurement basis Net Assets Gross Assets Replacement Assets

Inflation
For Performance measurement decide Consequences of Inflation 5 consequences of historical cost accounting which reduce the reliability of A/Cs due to price inflation Fixed asset values & depreciation Cost of Sales (high stocks) Borrowing benefits Ratio analysis Increase in working capital needed to support normal trading operations

Comparison Of Accounting Figures

Ratio Analysis Ratio Analysis between results of current year with last year other comps in same industry other comps in opther industries

CHAPTER # 8 MISSIONS GOALS & OBJECTIVES

KEY TERMS
Strategic Intent Mission - Mintzberg Mission Statement Goals Goal Congruence Culture Beliefs Values Customs Artrfacts Rituals Org Culture
Its simillar to Vision but it should have an emotional core Mission describes the orgs basic function in the society, in terms of products n services it produce These are the formal statements of an orgs mission n may b reproduced on various places the intentions behind decisions or actions, the state of mind that derives individuals or collecives of individuals called org to do what they do the state which leads the idvs to take actio which are in their self interest and also in the best interest of the entity The sum total of Beliefs , Knowledge, Attitudes of mind & Customs to which ppl are exposed in their social conditioning are what we feel to be the case on the basis of objective & subjective information are beliefs which are relatively enduring, realtively general & fairly widely accepted accepted ways of behaving in response to a given situation are modes of behaviour , representing culturally accepted ways of behaving in response to given situation are physical tools, designed by men, for their physical n psychological well being a type of activity, taking a symbolic meaning, it consists of fixed sequence of behaviour repeated over time it consists of Beliefs, Attitudes, Practices n Customs to which ppl are exposed during their interaction with org

REFERENCES
T.R Schein Peters n waterman Jhonson n Scholes Miles & Snow 3 levels of culture in org Mackinsey 7-S Model The Cultural Web Culture The Env & Strategy

SUMMARY
Vision n Strategic Intent
what the bus in now? what it would b ideally? what the ideal world b like? Functions of strategic intent

Goals n Objectives

Mission
Elements of Mission Purpose Strategy Strategic Scope Politics n Std of Behaviour Values n Culture Importance of Mission Mission Statements Characteristics Brevity Flexibility Distictiveness Mission n Planning Functios of mission

Mackinsey 7-S Model Peters n waterman Hard Elements Structure, Strategy Systems Soft Elements Shared values, Staff, Style, Skills Organisational Ice Berg French n Bell Formal Aspects Overt-- like Hard Elements Informal Aspects Covert - Like Soft Elements Cultural web Jhonson n Scholes Culture n Structure Roger Harrison Zeus These interelated 4 different stds Apollo The indv Athena type of work the org does Dionysus culture of org environment The Role Of Culture Culture The Env & Strategy Miles & Snow adv of understanding culture Miles & Snow Organisational Culture Defenders 3 levels of culture in org Prospctors Basic underlying assumps Analysers Overt Beliefs Reactors Visible Artifacts Denisons Model Factors affecting org culture Consistency Culture Cultural characteristics of Dynamic Comps Mission Culture Culture n Risk Involvement Culture Adaptability Culture Goal Congruence Types of Goals Ideological Goals Formal Goals Shared Personal Goals System Goals Commercial goals n objs Dealing Conflict between Goals rational evaluation Bargaining Compromise Sequential attention Set Priorities Stake holder Mapping covered in chp 1

CHAPTER # 9 MERGERS & ACQUISITIONS

KEY TERMS
Take Over
Purchase of a comp of the controlling interest in the voteing sh cap of another comp

Merger
is a Bus Combination that results in the creation of a new reporting entity , formed from the combining parties in which the share holders of the combining parties come together in a partnership for the mutual sharing of the risks n benefits of the combined entity & in which no party to the comb in-substance obtains control over any other, or is otherwise seem 2 b dominant whether any virtue of the proportion of its shareholders rightsin the combined entity, the influence of dirs or other wise

Boot Strapping
The process of buying a comp with a higher EPS in order to bost up ur own EPS

Consortia
Orgs co-operate on specific business prospects. ???????????

Joint Ventures
Two or more orgs setup a third org It is an arrangement where two firms (or more) join forces for manufacturing, financial & marketing purposes and each has a share in both equity n management of the business

Liscensing Agreements
It is a Commercial contract whereby the liscencer gives something of value to the liscensee in exchange for certain performances n payments

Franchising
is a method of expandng the bus with less capital than would otherwise be possible

REFERENCES
P.F. Drucker C S Jones Rules 4 Post Acq Integration 5 Step integration sequence

SUMMARY
Take Overs Rasons or Advantages of Merger/ Take overs Strategic Approach to Take over Other Factors in Takeover Decision Resistance from Target comp Contesting an offer Cost of Take over bids Payment Methods Cash Share Exchange Covertable loan Stock Mezzanine finance Earn out arrangements Boot Strapping Consideration of price earning ratio Accepting a dilution in eps Reverse Acquisition Monoply Authority Post Acquisition integration Rules 4 Post Acq Integration 5 Step integration sequence Managing Employees Merging Systems Failures of Mergers n Take Overs Joint Ventures , Alliances & Franchising Advantages Disadvantages Characteristics of Liscence agreement Characteristics of Franchising

P.F. Drucker C S Jones

CHAPTER # 10 CORPORATE REORGANISATION

KEY TERMS
Divestments
A divestment is a proportional or complete reduction in ownership stake of an org.

Demergers
Splitting up of a corporate body into two or more separate n independent bodies

Sell-Offs
A form of divestment involving the sale of a part of a comp to third party, usually another comp

Liquidations
It may b due to bakruptacy or Voluntary Dissolution n involves closure of whole business , selling of all the asssets and distributing net funds raised among shareholders in the proportion of their share holding

Spin Offs
A new comp is created whose shares are owned by the shareholders of the org comp which is making the distribution of assets

MBOs
It is the purchase of all or part of business from its owners by its managers

MBIs
When a team of outside managers as opposed to managers already running the bus mount a takeover bid and then run the bus

SUMMARY
Reasons For Divestments etc To concentrate on a particular part of bus Selling a loss makin unit Selling an attractive part of bus to save the rest Liquidity problems Sellling a subsidary with high risks Selling a subsidiary at profits Selling a subs that is a peripheral 4 group MBOs For Mng -- method of setting up a new bus For Owners -- method of divestment Parties To MBOs Management team Directors of Group Financial Backers Possible Reasons

MBOs
Questions in Evaluating a MBO

Mng has full range of skills? Why is the comp 4 sale?

Projected profits n Cashflows? What is being bought? Price ? Funds availablility? Exit Routes? Problems Little experience of fin mang Tax n other legal complications Changing the attitude of employees Deciding the bid price Cash 4 maintainance of fixed assets Changes in HR Ralations with suppliers / customers

Best offer may b from mng Sale can b arranged quickly Group can still maintain relations
N Other factors mentioned above

MBIs Capital Reorganisation Going Private

Exit Strategies for Venture Capitalists Sale of shares to st exchg Sale of comp to another firm Selling the shares to comp itself Success Factors of MBOs

Favourable buy out price Personal motivation n determination Quicker decision making n more flexibility Savings in over heads

From public to private comp Advantages Cost saving Limited number of members Simillar objs of share holders Sh holders are close to mng Disadvantages No trading of shares on st exch Lose of reepute

CHAPTER # 11 ETHICS & SOCIAL RESPONSIBILITY

KEY TERMS
Ethics
A set of moral principles to guide behaviour

Compliance Based Approach To Ethics

Ensures that the comp acts within the letter of law & that violations are Prevented, Detected & Punished

Integrity Based Approach

Combines a concern for law with an emphasis on managerial responsibility for ethical behaviour. It treats ethics as an issue of org culture & incorporates ethics into corp culture n sys

Whistle Blowing
is the disclosure by an employee of Illegal, Immoral or Illegitimate practices on the part of org

SUMMARY
Boundary Management Many comps share the same aspirations Levels of bus objectives Social n Ethical Environment Environment Political , Social , Legal Ethical problems facing Managers Examples od Social n Ethical Objectives Social responsibility of org n managers Social resp is expected from all type of orgs Arguments against Charity etc Arguments in Favour of Charity etc Ethics in Organisations Personal Ethics Professional Ethics Org Cultures Org Systems Leadership Practices & Ethics Creative Protective Integrative Adaptive Ansoff

Compliance Based Approach To Ethics Integrity Based Approach Tasks of Ethics Management

CHAPTER # 12 CORPORATE GOVERNANCE

KEY TERMS
Agency Theory
proposes that , although indv members of the team act in their own self interest , the well being of each indv depends on the well being of other team members n on the performance of the team as compared to other teams

Agency Cost
Difference between the return expected if managers truly maximised shareholders wealth and the actual return , given that managers will actually be seeking to maximise their own wealth Goal Congruence is the accordance between the objectives of agents acting witin an org and the objectives of the org as a whole Corporate Governance Cadbury report defines corp governance as "The sys by which comps are Directed & Controlled"

SUMMARY
Patterns Of Share Ownership Public Comps

owned by shareholders managed by managers ease of selling shares

Private Companies

Owner Managed Cant sell shares

Institutional Investors

They channel funds invested by idvs Advantages Disadvantages

Advantages of Knowing who major share holders are Potential Sources of Conflict AGENCY THEORY

Theory Behavioural AssuBehavioural Assumptions Structural Assumptions Criticism

Agency Cost Bonding & Monitoring Procedures Goal Congruence Procedures Profit related pay management audit procedures Information Sensitivity & Disclosure & Confidentiality

Code Of Corporate Governance Directors Introduction of non executive directors Qualification n eligibility to act as director Tenure of Office of Dirs 3 years casual vac to b filled in 30days Responsibilities Powers & Functions of BODs Shd b exercised with a sense of Objective Judgemnet & independence in the best interests of listed comps Statement of ethics n bus practices Vision n Mission Statement Internal Controls Powers to b exercised by Passing Resolution Meetings of BOD atleast once every quarter . Orientation Cources CFO & Company Secretary Appointment & Approval Qualification Requirements to attend board meeings Corporate & Financial Reporting Framework Directors report to share holders Frequency of Fin Reporting Responsibility of Fin Reportin n Corp Compliance Disclosure of interest by a Dir Holding Comps Shares Divestment of Shares by sponsers / controlling int Audit Committee Composition Frequency of Meetings Attendance Terms of Reference Reporting Procedures Internal Audit External Auditors Compliance with code of corp governance

CHAPTER # 13 HUMAN RESOURCES

KEY TERMS
HRM
Is concerned with ppl at work n their relationships as they arise in the working env The real requirement is proactive and constructive rather than Defesive n Reactive to discharge their true role , personnel managers must anticipate the needs of the org in the short n the long term They must develop policies to produce solutions to anticipated problems resulting from ext / internal env, whilst influencing n creating the attitudes amongst employees needed 4 the enterprises' Survival n Success Concerns the Acquisition , Utilization , Improvement n Return of an enterprises' HRs HR planning deals with Recruitment , Retention , Down sizing , Training n Retrainingto enhance skill base

HR Planning

SUMMARY
Objectives of HRM Organisation Requirements Cooperative Relationships Responsive to change Social n Legal Responsibility Adnatages Lncreased productivity Increased group learning Low Staff Turnover increased Initiative HR as a sourse of competitive advamtage Views of HRM The old "odd job view" The HR Plan Strategic Analysis The environment (PEST) Man power (SWOT) HR utilization Objectives Time scales Forecasting Estimating Demand Estimating Supply Current workers Labour Market Research position survey Closing the gap btw dd n supply Making subsidery plans to implement HR plans Job Analysis Investigating tasks performed in each job Identifying the skills required Relevent concepts Job description Job title , Reporting to , Subordinats Overall purpose , Accountability , Flexibility Job Specification Job Design Person Specification Assessing patterns of personality Desirable qualities in managers Implementation Two options Training Existing staff ( discussed in net chps ) Recruiting new staff Advertising Selection Applications n CVs Sift through Applications Interviews Testing Weightage of Biodata Group selection methods References Notifying Preparing Employment Contracts Induction training On day one Post employment training Copeing with Shortage Or Internal transfers Promotions External recruitments Reducing Turn over Overtime Training Control over Human Resources Gap analysis etc

According to Drucker "The personnel manager saw his role as partly a file clerk's job partly a house keeping job
partly a Social worker's job and partly "fire fighting " to head off

union trouble or to settle it"

HRM - Changing Trends Real req is proactive.... Roles of HRM 4 major roles suggested by Tyson

To represent the orgs central value sys To maintain the boundaries of the org To provide continuity n stability to org To asdopt the org to change
Existence of a seperate HRM department depends on : Size of the org Activities of the org Role of HRM department Organisation Organisation Design Organisation Development Manpower Planning Recruitment Employment Training Performance review Management Development Motivation Job design Remuneration Culture employ commitment is supposed to replace techniques of control imposed by management Employee Relations Dealin with trade unions Consultation n participation Employee Services Health n safety Indv employee welfare Personnel records

Surplus of HRs Restricting Recruitment Pert time working Redundancies Cuting wastage of resources

CHAPTER # 14 INDIVIDUALS
KEY TERMS
Personality
The total pattern of characteristic ways of "thinking, Feeling & Behaving " that constitutes the indvs' distinctive method of relating to the env

Attitude
Attitude is the position that an ind has adopted in response to a theory or belief , an object, event or other person. It is a subjective concept rather than Objective Orgs usually have generalised assumptions as to type of employees they would wish to employee and to whome they would wish to allocate various tasks n responsibilities In unfavourable markets a happy work force may not make an org profitable but they ll necessarily be more productive Content Theories assume that human beings have a package of Motives which they pursue ie they have a set of needs or desired outcomes Process Theories explore the process through which outcomes become desirble and are pursuaded by individuals. this approach assumes that a man is able to select his goals n choose the paths towards them , by a consious or unconsious process of calculation Motivators produces satisfaction when present n capable of motivating the individuals eg Achievement , Growth Status , Advancement , Gaining Recognition , Being given Responsibility Challenging work etc Hygiene Factors or maintenance factors -- these could not give satisfaction or motivation when present but there absence however causes dissatisfaction. Eg Comp policies , Salary , Job Security ,Workin conditions etc The need to avoid the unpleasantness is satisfied at work by hygiene factors The need 4 personal growth is satisfied by motivator factors n not by hygine factors Expectancy Theory The strength of an indvs' motivation to do something ll depend on the extent to which he expects the results of his efforts if successfully achieved , too contribute towards his personal needs or goals The strength of an individuals motivation is a product of 2 factors The strength of his preference 4 a certain outcome - Valence The individuals expectation that the outcome ll result from a certain behaviour ( subjective probability)

CHAPTER # 14 INDIVIDUALS
SUMMARY
Performance n Productivity Variables Affecting Performance Individual Variables Education Experiance Intelligence / Apptitudes Motivation / Interests Personality Characteristics Personal Circumstances Motivation Content Theories Maslow's Hierarchy of Needs Self actualisation ( fufilment of personal potential) Esteem Needs ( independence , status , respect ) Love / social Needs ( relationships, affection ) Safety Needs ( security , peace , order ) Physiological needs ( food , shelter ) Plus 2 higher order needs Freedom of inquiry n expression Need 4 knowledge n understanding ERG The need 4 existence The need to relate to others The need 4 personal growth also called "Existence- relatedness- growth" Herzberg - Two - Factor Content Theory He distinguished between hygiene facors n motivating factors based on what he saw as 2 separate "need systems" of individuals Process Theories Expectancy Theory M=VxE "M" is the strength of motivation to do sth "V" is 4 Valence ir strength of his preference for a ertain outcome "E" is Expectation that bahaviour will result in desired outcome Porter n Lawler Equity Theory Goal Setting Theory Psychological contracts Coercive Calculative Cooperative Pay n Job Satisfaction Difficulties associated with insentive plans Assessment of satisfaction n Morale Alleviating dissatisfaction n low morale

Organisation n Social Variables

Socaial Env Types of incentives Type of training n Supervision Situational Variables Character of Org Phy environmemt

Pyhsical n job Variables Work space n arrangements Design n Condition of Working Env
Methods of Work Managers attitude n org Culture Individuals Personality Individual Development Characteristics as indvs mature Organisations interest in Personal Development Frustration , Conflict , Feelin of Failure

Low Prospects etc causes High labour Turnover , Absentecism , n Preoccupation with financial reward that is Self Destructive for the org
Personality Differences n Work Behaviour Extroverts Neurotics / Introverts Type of Behaviour Authoritarianism Need 4 Achivement Self Esteem Attitudes Depends on Perception Personal Experiance Positive attitude leads to ... Indirect influences on Attitude

CHAPTER # 15 TRAINING & DEVELOPMENT

KEY TERMS
Resourcing an Organisation is about building n maintaining the "skillls n knowledge base" of the org Human Resource Development (HRD) The process of extending personal abilities n qualities by means of "Education, Training n Other Learning experiences" Development is the " growth or realisation of a person's ability n potential through the prov of learning n educational experience " Training is the " planned n systematic modification of behaviour through learning events, programmes n instruction which enable indvs to achieve the level of knowledge, skill n competence to carry out their work effectivly" Learning Organisation An organisation that facilitates the learning of all its members n continuously transforms itself Personal Development Plan is a clear development action plan for an individual which incorporates a wide set of developmental oppertunities including formal training

Skills
what the indv needs to b able to do if results are to b achieved. Skills are built up progressively by repeated training.

Validation of Training
Observing the results of the course and measuring whether the training objectives have been achieved Evaluation of Training Comparing the actual costs of the scheme against the assesed benefits which are being obtained If the costs exceed the benefits, the scheme ll need to b redesigned or withdrawn

SUMMARY
Purpose of HRD To meet req level of perf Continuous improvement in per Maximising ppls potential 4 growth Development activities Training Career planning Job rotation Appraisal Other learninig oppertunities Training n Development Stgy Based on overall stgy of firm Identify skills req Draw Formal development stgy Implementation Qualities of Good Training Relevence Problem based Action oriented Performance Related Benefits of HRD to Org Lower learning cost Avoid accedients Low supervision needs Flexibility Source of motivation Delegation of speacialised skills Copeing with new advancements Corporate Culture Training Does not Covers Poor job design, equipment etc Bad management Bad work env Personal handicaps Motivation Poor recruitment Advantages to Individuals Increases Portfolio of skills Psychological benefits Social benefits Better perormance on the job The Laerning Organisation Characteristics Role of Training Enables skills 2 b diseminated oppertunity 4 ppl to work together Investors in ppl Aspects Planning Regular review Action Evaluation Training Process in Outline Identify org's training needs Define learning requirements Define training objectives Plan training Programes Implement training Evaluation Feedback Training Needs Analysis Training surveys Bus strgy Appraisal / performance reviews Attitude Surveys Evaluation of existing programes Job analysis Training Gap is the gap btw Current Status Skill base Indv Performance Org's current results Desired State Knowledge n Skills needed required Std Desired results / stds Programing objectives Moving from current - desired Personal Development Plan Purpose Stages Analyse current position Personal SWOT analysis Liking of skills Performance Set goals Draw action plan Programing Objectives Behaviour Standard Environmental ( all objs shd b SMART ) Training Methods On the Job Instruction Job rotation Develop the perception Assistant to position Committees Projects Action Learning Formal - Course Training Methods Lectures Discussions case study Exercise Role Play Computer based training Course may b Internal courses Day release Distant learning Revision Courses Block release Sandwitch Course Learning Styles Theorists Reflectors Activists Pragmatists Learning Cycle Concrete experience Observation n reflection Formin abstract concepts n generalisations Applying / testing the implications of new concepts in new situations Evaluating Training Validation of training Evaluation of training Methods Tests Direct questioning Effect of training Difference in corp obj Trainees reaction to experience Change in job behaviour Impact on organisation's goals

CHAPTER # 16 APPRAISAL & CAREER MANAGEMENT

KEY TERMS
Appraisal is the systematic review n assessment of an employee's performance, potential n development needs. Education is that process that results in formal qualifications up to n including post graduation degrees Training is the formal learning activities which may not lead to qualifications, n which may b received at any time in a working career Development is a broader term including " job experience n learning from other managers, particularly one's immidiate superior" Managing Careers A technique whereby the progress of indvs within an org from job to job is planned with organisational needs and indv capacity in mind Management development Process of improving the effectiveness of an indv mnager by developing the necessary skills n understanding of org goals Effective appraisal depends on integrity n ability n efforts of indv manager Assessment must b related to an established std inorder for comparisons to b made btw individuals Appraisal reflects the values an org seeks to promote A correct appraisal with correct implementation of action plan onfluence success of org

SUMMARY
Purpose of Appraisal Systematic n planned review of Performance ( behaviour of person ) Potential (capacity of person) Training Needs Identifies indvs having potential 4 growth Determines key areas of improvement Manpower planning Increases Communication Monitoring org's selection procedures Need For Appraisal Compel to analyse performance Justifies the judgements Give feed back to appraisee Process Of Appraisal Identify criteria 4 assessment Assessment report by manger Assessment interviews Review by assessors supervisor Prepare n implement Action plan Follow up Approches 4 Assessment Interview Tell n Sell method Tell n Listen Method Problem solving approach Folowup Procedures Discuss results with appraisee Carryout proposed action (promotion / training) Monitor the perf Get feedback n make necessary changes Points to b Considered Org plan n problems Personal characteristics System problems Relevence Fairness Serious intent Cooperation Efficiency Techiniques of appraisal Overall assessment Guided assessment Grading system Target oriented methods Behavioural Incedent Methods Result oriented schemes What Is Appraised Key performance issues relate to job discription Personality is not relevent unless directly related Competence Ability to transfer skills Self Appraisal Saves time n cost Increases responsibility n motivation May reconcile goals of indvs n org But ppl are not often the best judge of themselves Effectiveness of Appraisal Depends on The effort put in by mangers Integrity of managers Ability to write Observation of manger Problems with Appraisal Confrontation Biased report Perf levels not being standerdised Subjective feedback Feed back based on recent perf only Disagreement on long term prospects One sided process Appraisal as chat Appraisl as Bureaucracy Appraisal as unfinished business Different ppl having different criterias Assessor possesses some desired traits Limiting the expression to checklist Managers may not have time to observe Indvs perf may b affected by others Appraisl is often defesive ( interplay of emotions playing with someones carear etc ) Org culture may not take appraisal seriously Appraisal n Pay Problems in giving performance based reward Lack of funds Some firms have to "run to stand still" Small cash pay increases in low inflation economy Comparison btw indvs is hard Pay is given 4 future not past New Approches to appraisal Upward appraisal Customer appraisal Degree Appraisal Managing Careers Advantages Indv n Org Issues Model A Model B Future / Long Term Planning For C Mng Education Training n Development Dev Tr Edu Management development Necessary Skills General skills Ability to motivate n organise others Goal matching of department Coordination of dep Understanding other dep's goals Techniques Formal education n training Group learning Confrences / Seminars Counselling with seniors on the job learning Transition from Functional to General Management Roles Funct Mng Gen mng Orientation Task oriented Goal oriented Role Organiser Facilitator of res Goals Short term long term

CHAPTER # 17 MANAGEMENT & THE HUMAN RESOURCE

KEY TERMS
Two imp variables in managerial effectiveness are style and a capacity to motivate subordinates A managers style is the way in which the manager handles his or her relationship with the task n with subordinates This is sometimes referred to as leadership which is the process of influencing others to work willingly and to the best of their capabilities Responsibility Is the lib of a person to discharge duties. The concept of responsibility is associated with Accountability Managers are accountable to their supervisors as to how well they have delegated their duty

Organisational Authority The scope n amount of discretion given to a person to make decisions, by virte of the position he or she holds in the org Delegation Of Authority Assignment of authority to subordinates with with the discretion to make decisions within a certain sphere of influence Power is distict from authority but is often related to it. Whereas authority is the right to do something, power is the ability to do it Influence The process by which a person in an org changes the attitude of another through eg Force, rules, Persuation, Bargaining n Negotiation Authority n power in an org defines two things The part that each person is expected to perform The relationship btw members So a manager delegates authority to his subordinates which creates responsibility while the subordinate in responce is accountable to his manager n the manger is accountable to his superior Discipline Discipline promotes good order n behaviour in an org by enforcing acceptable stds of conduct. It can be enforced by sanctions, encouraged by example or created by indv's own sense of what is fitting n proper employees best efforts have not reached the stds required Delebrately not doin the best

Incompetence Misconduct

SUMMARY
Management / Leadership Theories Trait Theories Certain traits makes a person good leader Style Theories Heckman Dictatorial Autocratic Democratic Laisez Faire Ashridge Management College Tells Sells Consults Joins Rensis Likert ( Style n Effectiveness ) Four main elements in Effective managers High performance Employee centered Give independnce to subordinates Participative Trust Blake's Grid X axis - Concern 4 production Y axis - Concern 4 people Points Impoverished Country club Task Management Middle road Team J Adair's Create balance btw Task needs Group needs Indv Needs Power Types of power Physical power Resource power Negative power Position / Legislative power Expert power Personal power Power at Different Levels Senior mng Middle mng int groups Dept powers Discipline Disciplinary Problems Absenticism Poor perf Bad attitude Breach of safety rules Refusal to carry out instructions Disciplinary Actions Reprimand Informal talks Writtem warnings Demotion Discharge Disciplinary lay offs / Suspension Causes of dismissal Unfair Dismissals Redundancies Health n Safety at work Physical n Psychological Health Importance of health n safety in org Causes of Accidents in relation to work place Duties of Employer Duties of Employees Systematic approach towards health n safety Discremination N Equal Oppertunity Special entitlement in case of Maternity Ways of Discremination Direct Indirect Position (Quota schemes etc) Equal oppertunity employers National Legislations

CHAPTER # 18 GROUPS IN ORGANISATION

KEY TERMS
Group Is any collection of ppl who perceive themselves to b a group A primary working group is the immediate social env of the indv worker

Team Is a small number of ppl with complementary skills who are committed tp a common purpose, performance goals n approach for which they hold themselves basically accountable Team Working Team working allows work to b shared among a number of idvs , so it gets done faster without ppl losing sight of their whole tasks or having to coordinate their efforts through lengthy channels of communication

SUMMARY
Creating Effective Teams Groups Common sense of identity n belonging Loyalty to the group Purpose n leadership Teams Aspects of team Work organisation Control Knowledge generation Decision making Multi disciplinary Teams Multiskilled Teams Development of Teams Forming storming Norming performing Ideal team Characteristics Problems with teams Creating an Effective team Givens Intervening Factors Outcome The value of groups as work units Limitations of Teams Group Norms Conflicts in Organisations The Happy Family View The Conflict View The Evolutionary View Constructive n Destructive Conflict Charles Handy - Differences appear in 3 ways Arguments Competition Conflict Conflict in Groups n deparments Ways in which groups behave Group cohesion , competition n conflict Conflicts Between groups Withing Groups Between competing groups Win / Loose situation chrs of winning group chrs of loosing group Cohesion n group thinking Group subcultures n conflicts Causes n Tactics of Conflict btw deps Operative goal incompatibility Differenciation Task interdependence Scarcity of resources Power distribution Uncertainity Removal sys Political Behaviour Aspects of organisational politics Mintzberg - Various Political games Games to ........... Resist authority Counter this resistance Build power bases Defeat rivals Change the org Political Activities can occuer in Following ways Structural Changes Interdepartmental Coordination management Succession Allocation of Resources Political Tactics Increase the power base Build Coalitions Expand networks Constrain the decision Withhold inf Present inf in a distorted manner Reimpose sales procedures etc By pass formal channels of communication Managerial Response To Conflict Initial Mng Response May Be Denial Suppression Dominance Compromise Integration / Collaboration Conflict may b Reduced by Structural seperations Bureaucratic authority Limited Communication Cooperative Behaviour Might b Encourged by Integration devices Confrontation / Negotiation Consultants Job rotation Super oriented goals Intergroup training Conflict Btw Mng N Organised Lab Unions More problamatic Needs collective bargaining Joint mng union committees

CHAPTER # 19 STRATEGIES FOR CRITICAL PERIODS

SUMMARY
Mainitaining Changes in Times of Change Organisational Change Change within Chg dueto external Pressures PEST Customers Competitors etc Nature of Change Products Produced Services Provided Methods Of Production Style Of Leadership Working Conditions Personnel Policies Org Structures / Size Organisation Life Cycle Sigmoid curve Birth Growth Maturity Decline Models of Growth n Development Criterias 4 Measuring growth Reasons 4 Growth Greiners Model Phase Crises of Growth Through 1 Leadership Creativity 2 Autonomy Direction 3 Control Delegation 4 Red Tape coordination 5 ? Collaborations X axies - Age of org ( young - mature ) Y axies - Size of org (large - small) Criticism Logical Incrementalism Issues of Size Large orgs Small Orgs Contraction & Decline Causes Environmental Entrophy Vulnerability Organisational Atrophy 4 Stages in Crises Blinded Stage Inaction / Hidden Crises Faulty action / Disintegration Crises & Collapse or Dissolution Remidies Feed back failure Turn Round Recovery policy Contraction reinvestment Rebuilding Structural Reorganisation n Redevelopment

CHAPTER # 20 INTRODUCING CHANGE

KEY TERMS
Learning also involves relearning / not merely learning new things but trying to unlearn what is already known "Behavioural Diagonosis" analyse the disturbances caused to cultures n power structures in each unit Force Field Analysis It is based on interplay of Restraining n Driving forces that keeps things in equilibrium So it maps the forces that are pushing towards the preferred state n the restraining forces which are pushing back to current state Organisation development Methods Set of techniques intended to improve effectiveness by improving the relationships btw ppl in org

SUMMARY
Methods of Change Steps involved Determine need 4 change Prepare tentative plan Analyse probable reaction Final Choice Establish Time Table Communicate the plan Implement The Change Process Unfreeze existing behaviour Attitudinal / Behavioural change Refreeze new behaviour Ways of Bringing Change Coerceive Change Adaptive Change Managed Change Crises Management Further Strategies ( after eliminating unnecessary resistance ) Spread over greater time Exclude the ones not willing to change Make indvs responsible for Implementation Decision Making Resistance To Change Change may b Psychological change Phsiological change Time Circumtance Forms / Causes of Resistance Possible reactions to change Acceptrance Indifference Passive Resistance Active Resistance Overcoming Resistance Force Field analysis Restraining Forces Dislike 4 work Over Production High stds of perf Dislie 4 supervisor Deriving Forces Fear of Dismissal fin Incentives Fear of loosing previalages Pressures from mng Factors to b Seen While Introducing Change Place Manner Scope Organisation development Methods Drawbacks Using an External Consultant Phases involved Recognition of problem at work Assesing that it cant b soved internally Outsourcing the change to external consultants Data gathering Diagonostic Exercise Identification of weeknesses Cure Strategy Formulation (FDD) Communicating to employees Corporate Culture n Change Cultural change Unhealthy Culture Cultural Gaps

CHAPTER # 21 THE CHANGING ENVIRONMENT

KEY TERMS
Political Risk
in a decision is the risk that political factors will invalidate the stgy n perhaps will severely damage the firm

Forecast
Prediction of future events & their quantification for planning purposes Forecasting is done to analyse the env & its affect on the bus & what strategies are useful

Strategic Intelligence
what a comp needs to know about its bus env to enable it to anticipate change & design appropriate strategies that ll create bus value 4 customers & b profitable in new markets & new industries in future

Exchange Rate Econometrics

The rate at which a national currency exchanges 4 another national currency Study of economic variables & their interrelationship

SUMMARY
Relating Org to environment org task env general env Stgy ensures environmental fit 4 org Complexity Dynamism Timesacale horizon

Technological Env
Effects may b Gain in output Reduction in Cost New type of Products Org would have to keep an eye on Type of product / service Production process Ways of Providing services Ways of Identifying markets Social consequences of Tecnology

short term long term

Political / Legal environment Legal Frameworks Specific Regulations n Policies of govt in respect of any bus / industry ( TR Porter) Incentives

Interest n Pressure Groups

Exist within n outside the firm Cause Group Interest Group

Entry Barriers Divestment Competitors Demand Political Risk Effect of Govt Agencies on operations
Influencing Govt Policies Questions to b asked by comps to themselves Economic Environment

Forecast
Time series analysis Regression Analysis

Strategic Intelligence
Strategic Intelligence Model Sensing Collecting Organising Processing Communicating Using Sources of Strategic intelligence Internal External Key Dimentions In Strategic Intelligence inf culture Future Orientation Structure of inf flow Processing Strategic intelligence Time Horizon Organisational Memory Env data ought to b included in a Data base .. Strength of customer position depends on Internet Database inf System Workin env in Pakistan

Increase / Decrease in GDP

Inflation Tax levels Govt spending Business cycle Gov Policy Fiscal Policy Monetary Policy International Trade n X Rates Floating X rate Fixed X rate Demoraphic Factors imp 4 Org Growth , Age , Geography , Employment Social Structure, Household/ Family Structure Privatisation of Public sector Objectives Social n Culturl Env Underlying characteristics of Culture Purposeful Learned Shared Cumulative Dynamic Value 4 Bus 4 Marketing 4 HR Managers Society can b divided in Subcultures

CHAPTER # 22 THE GLOBAL COMPETITIVE ENVIRONMENT

KEY TERMS
Market:
comprises the consumers or potential consumers who have needs which are satisfied by a product / service

Industry
comprises those firms which use a particular Competence, Technology, Prouct, or Service to satisfy customer needs Competitive Forces External influences upon the state of actual or potential competition in an industry , which collectively determine the profit (long term return on capital ) potential of the industry as a whole

Substitute
A good or Service produced by another industry which satisfies the same customer needs

Competitive Position
The market share, costs, prices, quality & accumulated experience of an entity or a product realative to competition

Competitor Analysis
The systematic review of all available information ( marketing, production, financtial etc ) on the activities of competitors in order to gain competitive advantage

SUMMARY
Competitive Forces Porter 5 Factor Model Threat of New Entrants Entry Barriers Threat From Substitue Products Bargaining Power of Customers Bargaining Power of Suppliers Rivalry among current competitors in Industry Impact of IT on Competetion Impact of Globalisation on Competition Globalisation of Markets Demand Supply Polices Factors affecting Globalisation of World Trade Competitive Advantage Of A Nations Industry Determinants of National Competitive Advantage The Dimond Model Porter Firm Strategy, Structure, Rivalry Factor Conditions Related & Supporting Industries Demand Conditions Influencing The Dimond Interactions between the determinants

Competitor Analysis
Analysing competitors goals Competitor Response Profile Management Accountant n Competitor Analysis Competitor Modelling

CHAPTER # 23 THE EVALUATION OF MARKETING CONCEPT

KEY TERMS
Marketing
Marketing is the management of Exchange Relationships Marketing is concerned with meeting business objectives, by providing customer satisfaction

Product Orientation
is the management view that success is achieved through producing goods of optimum quality n costs and therefore , the major task of management is to persue improved production n distribution effeciency

Sales Orientation
Is the management ofview that effective selling n promotion are the keys to success

Marketing Management
is the process of Devising, Implementing & Monitoring the Marketing Plan

Marketing Audit
is a systematic analysis & evaluation of the org's marketing position & performance

Consumerism
is a term used to describe the importance n power of consumers.

Marketing Mix
A schematic plan to guide analysis of marketing problems through utilisation of a list of the important forces ementing from the market which bear upon the marketing operations of an enterprise & a list of elements ( policies n procedures) of marketing programmes Mass production techniques shifted the focus from "how to produce enough" to " how to increase demand" Thinking about the customer needs A successful stg needs to fit into the external operating environment, but remains consistent with internal attitudes & beliefs / capabilities

SUMMARY
History of Marketing Features of a Market Oriented Organisation Market Orientation Vs Sales / Production Orientation Need 4 Sales Force Problems in Introducing The Marketing Orientation How Marketing Fits into Business Operations Ensure that all deps are working towards same goal Scope Of Marketing Product Planning Branding Pricing Channels of Distribution Selling Personnel Advertising / Marketing Communications Promotions Servicing Potential Conflicts between departments Marketing Management Analysis Planning Control Marketing Environment

The Micro Environment

The market env the org operates in Consumers Distributors Suppliers Competitors Interest groups Internal aspects of the org Culture Skills Benefits of understanding the env Marketing Audit Marketing Capabilities Performance Evaluation Competitive Effectiveness The Macro Environment Concerned with broad trends & patterns in society PEST factors Ethics / Consumerism Rights of Consumers . Marketing Mix

CHAPTER # 24 STRATEGIC MARKETING & PLANNING

KEY TERMS
Strategy does not just focus on organisational effeciency. It is more imp that the org shd b effective Effeciency here relates to doin a task well, but Effectiveness relates to having the right products in the right place at the right time Profit first depends on the nature of the stg n 2ndly on the inherent profitability of the industry

SUMMARY
Marketing Strategy
Components of Strategic Marketing Designation of Specific Desired objectives Commitment of resourses to these objectives Evaluation of a range of environmental influences

Targeting
Undifferentiated Concentrated Differentiated Advantages n Disadvantages

The Planning Cycle

(Also discussed in chp 2 ) Where are we now? Where do we want to be? Which way is best? How do we get there? Getttin there ! Ensuring Arrival ! Over differentiated Marketing Audit Deciding Objectives Deciding Strategy Deciding Tactics Implemention Controlling

Positioning Products / Brands

Possible positioning characteristics Perceptual map Identifying a gap in the market Competitive positioning Fragmented markets n market segments

Marketing Planning & Strategy

Must b in harmony with over all corp goals Corp objestives ll b translated in SMART marketin objs Stgy development links corp n market level plans information may b gathered by Situation analysis Swot analysis PEST n other environmental analysis

The Marketing Plan

Relationship with overall corp plan Phases of Marketing Plan Situation Analysis Objectives n Goals Marketing Strategy Action Programe Budgets Controls

Porter 5 factor model

Planned activities shd b flexible Cost focus n differentiation

Formulating Marketing Strategy Segmentation

Steps in Analysis of Segments Market segmentation n Marketing plan Properties of each segment Basis 4 segmentation Typical market segment Family life cycle Jicnaras Scale Psychographic segmentation / Life style Segmentation Geo-demographic segmentation Requirements 4 effective market segmentation Measurability Assessibility Substantiality Segmentation of Industrial market Benefits of segmentation Quantify Targets Other techniques like PLC Operational Plan Tactical Plan Objectives of devising a marketing mix

The Marketing Budget

Importance n advantages Matching forecast demand with capacity Advertising budget decision Control Allocation of Costs

The Marketing Audit

Overviewing the marketing process Internal n external Aspects Ansoff matrix IT in marketing Audit

CHAPTER # 25 MARKETING RESEARCH

KEY TERMS
Marketing Research Market Research Primary data Secondary Data MIS

SUMMARY
Characteristics of Marketing Researh Aim - To Reduce Cost Types of Market Research Product Research Pre testing / Post testing Motivational Research Lab tests Rating tests Test Marketing Simulted store technique Controlled test marketing Post testing Recall tests Recognition tests EPOS information Internet D S System Recording Data about attitudes Likert scales Semantic differential scales Evaluating Data Statistical Techniques Multiple Regressio Analysis Discriminate Analysis Tests of Statistical Significance Interpretation of Results Secondary Data Sources Internal External Inhouse or External agencies Advantages / Disadvantages etc Management Information System Contains inf from Internal reports Marketing Intelligence sys Marketing Research System Analytical Marketing System Considerations 4 a good storage n retrival sys Qualities of Inf Dissemination of inf Design of MIS Basis .... User needs Components Sys inputs Data Manipulation System outputs

Points to b considerd - New Ideas Keeping ongoing goods under review

Market Research

Cost effectiveness Research Procedures

Define Problem Collection of data Presentation of data Management decisions Design of research Alanysis of data price research Sales Promotion Research Distribution Research Primary Data Methods Experimentatin Observation Sampling Mathods Random Sampling Systematic Sampling Multistage Sampling quota Sampling Cluster Sampling Potential Faults Questionaries Postal Surveys Considerations in designing Consumer Pannels Trade Audits / Retail Audits

CHAPTER # 26 PRODUCT
KEY TERMS
Product Consumer Goods Industrial Goods PL Cycle Product Portfolio Pr Markt Matrices Services
In the Context of marketing a "product is something that satisfies a set of wants" that a customer have Sold directly to the person who will ultimately use them Used in the production of other goods Plc has an almost biological basis. It asserts that products are Born (or introduced), grow to reach maturity, n then enter old age n decline A comps product portfolio is all the product lines n items that the comp offers 4 sale Used to classify a product or even a business according to the features of the market and of the product Any activity of benefit thatone party can offer to another that is essentially intangible n doesnot result in ownership of anything

Inovation is the life blood of a successful org n the management of this innovation is central to its success It may b immpossible to obtain influence orcontrol over perception of what is good or bad customer service Effective marketing strategy ensures that the orgs resources are directed to the most suitable market segement

SUMMARY
The Product Attributes of a Product Tangible Attributes (Quantitative) Intangible Attributes (Qualitative) these may b interlinked Product Classification New Product Development New prod may b developed by ... Technical break throughs Change in society To copy n capitalise on success of existing products What is anew product ..... Opens new markt Replacs existing prod Brodens existing market An Old product can b new if... Introduced to new market Packaged differently Differet marketing approach Change in marketing mix Degrees of Newness Unquestionably New products Partially new products Major product Change Minor Product change Sources 4 New Products Liscencing , Acquisition etc Screening New Product Ideas Graph Y axies - # of new ideas X axies - Stages in screening process Initial assessment Bus Analysis Development Test Launch Launch Commersialisation New Product Development Plan Only take new prod to adv stage if Adequate demand Compatible with existing mrkt ability Compatible with existing production ability Stages Conception of Ideas Screening of ideas Bus Alanysis Product Development Marketing Mix Issues Product Launch Services n Servie Marketing Distinguishing Features - Goods vs Services Intangibility Inseparability Heterogeneity Perishability ownership Ways of Countering it Intanginility - As a matter of degree Marketing Implications Heterogeneity Marketing Mix 4 Services 4 Ps + 4 more People Process Physical evidence Personal Selling Quality Differentiators Product Vs Service

Consumer Goods
Convinience goods Shopping Goods Speciality Goods Unsought Goods Industrial Goods Installations Accessories eg PCs Raw materials Components supplies The Product Life Cycle (PLC) Phases Introduction

Growth
Maturity Decline Senility

Exceptions
Buyers through PLC stages How are PLCs assesed ? Decisions to b taken after assesment Criticism of PLC Strategic Implications of PLC Product Portfolio Planning Product Mix ( Ascepts / Chrs of portfolio ) Width Depth Consistency Extending the product mix Product Market Matrices The BCG Matrix Stages Problem Child Star Cash cows Dogs Criticism The GEBS Matrix Classifies products or bus according to : Industry Attractiveness Business Strength (Strong , Avg , Weak) Packaging Functions Protection of contents Distribution Selling user Convenience Confirm to govt regulations Qualities required of good packaging Packaging - an imp aid to selling

CHAPTER # 27 PRICE
KEY TERMS
Price
Can be defined as a measure of the value exchanged by the buyer for the value offered by the seller It reflects the cost of producing the product to seller n the benefit of consuming the product to buyer Price Sensitivity Refers to the effect a change in in price ll have on customers

SUMMARY
Price A competitive tool to differentiate a product Shd b consistent with other elements of mix Contributes to overall image of product Objectives specified 4 pricing decision Maximising profit Maintaining or Maximising Market share 3 main influences on Price Cost Competition Demand Price Sensitivity It ll vary amongst purchasers Those who can pass it to others ll be least sensitive General Findings Typical Demand curve Curve not a straight line Exceptions Factors affecting pricing Decisions Intermidiaries' objectives Competitors actions Suppliers Inflation New product pricing Income effect Multiple products Price sensitivity Quality Connotations Methods of Price Determination Price setting in Theory Price Elasticity of Demand % change in qty demanded % change in price Price setting in Practice Market Pentration Objective Market Skimming Objective Early Cash Recovery Objective Product Line Promotion Objective Intermidiate Customers Cost Plus Pricing Target Pricing Price Discrimination Going Rate Pricing Quantum Price Od Number Pricing One Coin Purchase Gift Purchase Product Line Pricing Competitive Pricing Price Leadership Absorption n Marginal Costing Breakeven Analysis Breakeven point = total fixed cost contribution per unit

CHAPTER # 28 PLACE
KEY TERMS
PLACE
Is concerned with the selection of "distribution channels" used to deliver goods to consumers

Distribution Channels
The institutions through which goods or services are transfered from producers to consumers Logistics Management involves "Physical distribution" n "Material management" encompassing the inflow of rawmaterials n goods n the outflow of finished products

Just in time
aims to "produce instantaneously , with perfect quality n minimum wastage" + getting customer satisfaction

Customer loyalty is no longer to be taken for granted The keyword of modern market place is Flexibility

SUMMARY
Functions Involved in Distribution Process Transportation Stock Holding n Storage Local Knowledge Promotion Display Types of Distributors Retailors Whole Salers Distributors / Dealers Agents Franchising Multiple Stores Direct Selling Considerations in Choseing Distribution Channels Direct / Indirect Distribution Channels How far the manufacturing comp wishes to carry out various marketing functions like Bringing buyers b sellers together Offering sufficient choice of goods Forming a favourable opinion of goods Distribution - Factory to Retail outlets Maintaining adequate sales level Aftersales service Credit policy Maintaining acceptable price How many intermidiate stages shd be used Customers Product characteristics Distributor Characteristics Competitor's Channel choice Supplier characteristics Market Exposure required Intensive distribution strategy Exclusive ............................... Selective ............................... Factors favouring Use of Direct Selling Intermediaries Multi-Channel Decisions Industrial n Consumer Distribution Channels Channel Dynamics Vertical marketing sys corp marketing sys contractual marketing sys administered marketing sys Logistics Management Advantages Functions Organising Inventories Ware houses Purchasing Packaging Just in time Distribution n New Technologies Changing ways of conducting business Mobiles E Commerce Digital technology Cable n Digital Television Internet DTRV International channels

CHAPTER # 29 PROMOTION
KEY TERMS
Promotion Promotional Mix
is concerned with communication btw the seller n buyer. There are various communication mediums available to the org. In firms with a coordinated promotional strategy the activity of the sales team will be supported n supplemented by a combination of other communication tools This combination is reffered to as the Promotional Mix

Marketing theory suggests that a range of tactics is more succesful than "putting all ur eggs in one basket" The sales person must b aware that it is not just "what is said" which has an impact. "how something is said" communicates the sales person's attitude to customers

Sales Promotion

are those marketing activities other than personal selling, advertising n publicity, that stimulate consumer purchasing and dealker effectiveness. Sales promotion includes displays, exibitions, n demonstrations There is often a direct link btw sales promotion n short term sales volume Merchandising is concerned with putting the manufacturer's goods in the right place at the right time are events usually organisedby an outside agency or trade / professional association , that gather related industry players together to communicate ideas , n hopefully generate new business any paid form of non personal presentation n promotion of ideas , good or services by an identifiable sponsor It is "hierarchy of effects model" Awarenes - interet - Desire - Action

Merchandising Exhibitions n Trade Fairs Advertising AIDA Model Relationship Marketing Branding Trade Mark

is a new body of theory within marketing that changes the focus away from getting customers to keeping customers A sale is not the end of the process but distinctively the start of an orgs relationship with customers A brand is a Name, Term, Sign, Symbol or design intended to identify the product of a seller n to differentiate it from those of competitors is a legal term covering words n symbols

SUMMARY
Promotional Mix Org's promotional mix Sales Promotion Sales Literature Peronal Selling Exhibitions Public Relations Advertising Combining Promotional Techniques Advertising's Fundamental objectives Sales Promotion objectives Sales force objectives All these compliment each other Push n Pull effects Peronal Selling n Sales Promotion Elements in Process of Personal selling Sender Message Channel Receiver feedback Paying the sales force Agents on commission only basis Salaried employees on salary with bonus Sales Promotion Have more direct effect on usage than does advertising Examples Consumer promotions Retailer or Middleman Promotions Sales force promotions Industrial Promotions Objectives of Sales Promotion Merchandising Right place Right Time Point of sale Material Exhibitions n Trade Fairs Advantages To visitors To manufacturers Advertising AIDA model Purpose of Advertising Classification Informative advertising Persuasive Advertising Reminding Advertising Above the line n Below the line Specific goals of an advertising compaign Role of Advertising in Industrial Marketing Awareness building Comprehension building efficient Reminding Lead Generation Legitimisation Reassurance Planning a Promotional Compaign Stages Involved Identify The Target Audience Specify The Promotional Message Select Media Schedule Media Set The Promotional Budget Evaluate Promotional Effectiveness Successful advertising Advertising Agencies Relationship marketing & Key Account management Auditing Fulfilment of customer Needs Typical factors to identify a Key Account Historic value of purchases Expected future purchases Other competitive factors Extra Resources Devoted to Key account Time Finance procedures Hospitility Branding Reasons 4 branding Branding Strategies Family Branding Brand Extension Multi Branding Trade Marks Publicity n Public Relations Sponsorships Advntages Technological Developments

CHAPTER # 30 GLOBALISATION
KEY TERMS
Scarce Resources
is a resource 4 which the quantity demanded at nil price would exceed the available supply

Scarcity
is the excess of human wants over what can b produced Choice is only necessary because the resources are scarce

Production Possibility Curve (PPC)

PPC illustrates the need to make a choice about what to produce when it is not possible to have everything

Oppertunity Cost
The cost of an item measured in terms of the alternative forgone is called OC

Absolute advantage
A country is said to have an Absolute advantage in the production of a good when it is more effecient than the other country in the production of that good

Comparative Advantage
The law of comparative advantage states that two countries can benefit from trade when each specialises in the industries in which it has lowest oppertunity cost Here one has to decide if it would b cheaper to produce a good or to import it

Purchasing power parity

The PPP approach is to calculate an exchange rate based on the relative cost of purchasing the same basket of goods in 2 countries (eg price of 'big mac' in different countries)

Transnational environment
Each regional n national unit achieves global scale n influence within overall org by exploiting its specialized competences on behalf of the whole comp. R & D etc may b centralized

SUMMARY
Economic Fundamentals Limited Resources n Scarce Means Study the nature of Choices what ll b produced what ll b consumed who ll benefit from consumption Production Possibility Curve (PPC)
Qty of B

Protectionism in International Trade

Discouraging of Imports By Govt

Objectives To protect home market Political factors Others Methods Tarrif Barriers Non Tarrif barriers Indirect Barriers Regional Trade Groups Global Stratigic Management Globalisation Management Orientation Ethnocentrism Polycentrism Geocentrism Regiocentrism Developing the Global Business Expoting Overseas Branch Overseas production Insiderisation Global company Designs for Global Businesses
Requirement 4 local adaptation n responsiveness
high low

Qty of A

Oppertunity Cost Economics of International Trade Absolute Advantage Comparative Advantage

Reasons to export ( Covered in chp 31 )

Arguments against Specialisation Money n Trade Exchange Rate Risk 3 Types of excahange rates Fixed Managed Floating Ethnocentrism Ethnocentrism Ethno but low level Polycentrism Geocentrism

Purchasing power parity

Pressure to Globalise

high low

Global env International env

Transnational env multinational env

CHAPTER # 31 GLOBAL STRATEGY

KEY TERMS
Undifferentiated Marketing Differentiated Marketing Concentrated Marketing Exclusive Distribution Selective Distribution Intensive Distribution Logistic management

SUMMARY
The International Planning Process Reasons to Export Difference between Domestic & Intern Bus
Cultural Factors Economic Factors Competitive Factors ( data availability etc) Technological factors HR Issues Expatriates Vs Local Staff advantages & disadvantages HRM Recruitment Career Management Appraisal scheme Communication Culture n the Org Variety of Culture due to varied mambers Corp Culture Management Culture Hofstede Model of National Culture Distribution (Placement) Strategic importance of Distribution ....... Key issues in distribution Coverage n Density Channel Length Power n Allignment Logistics Distribution Channels Qualities of a good distribution channel Consumer trading Channels Bus Trading channels Buyer behaviour n Culture Product features ( affect choice ) Competition ( indicate usual form of trad chanels ) Comp objectives in market Motivating Agents Methods Difficulties International Physical Distribution Logistic management Services Reason 4 Development Controlling Global Performance What stds to b adopted? Ways of establishing stds Local help International comparison Obtaing Performance information Control of intermidiaries Social n Cultural Behaviour Demographic issues in overseas marketing Study of population n their characteristics Buying Patterns Behavioural Determinants Inhibitors Socio economic status Family structure

Objectives - the starting point of planning Modelling Strategic Planning Process

Preliminary Analysis & Screening Adopting marketing mix to target markets Developing the marketing plan Implementation n Control

International Marketing Research

Advantages Objectives Strategic Questions for IMR Information Sources Human Sources Documentary Sources Direct Observation / Personal experience IMR Process Monitoring Investigation Research Using IMR Data Problems in IMR

Modes Of Entering An Overseas Market

Exporting ( Direct / Indirect) Overseas Production Liscencing Determinants of Decision Standardisation / Adaptation 3 broad types of marketing mix Undifferentiated Marketing Differentiated Marketing Concentrated Marketing Barriers to Standardisation Environmantal Variables relating to 4 Ps Economy Culture Competition Law Products n Communication

CHAPTER # 32 APPRAISAL OF OVERSEAS INVESTMENT DECISIONS

KEY TERMS
Political Risk
is the risk that political action ll affect the position n value of a comp

Tax saving oppertunities may b maximised by structuring the group n its subsidiaries in such a way so as to take the best advantage of different local tax systems Method of financing a subsidary ll give some indication of the nature n length of time of the investment that the parent comp is prepared to make

SUMMARY
Forms of Foreign Direct Investment Foreign Direct Investment (FDI) New startup investments Overseas subsidiary Wholly owned Partially owned Take over or Mergers Political Risk n Blocked Funds Govt may impose restrictions / Barriers Tarrif n non tarrif barriers etc ( as discussed in chp 31 ) Strategies to limit Political Risk Negotiation with host govt Insurance Production strategies Contacts with markets Financial Management Management structure Exchange Controls To restrict the flow of Foreign exc into n out of a country Govt may impose following restrictions Rationing the supply of Foreign exch Restricting the types of transactions Ways of overcoming Blocked Funds High Transfer pricing Royalty High Interest on Loans Management Charges Taxation in Multinationals Tax Planning Foreign tax credits to avoid double taxation Tax heavens

Joint Ventures etc

Industrial Co-operations Joint Equity Alternatives to FDI

Exporting
direct Exports Indirect Exports Export houses Specialist Export mng Firms Complementary exporting Liscencing International Capital structure Decisions Points to b considered while raising Finance 4 subsid

Equity policy
Dividend policy Pattern of holding

Borrowing policy
Working cap policy Currency risk in financing a subsidiary Advantages of borrowing in same currency Factors influencing choice of Finance 4 subs

Local finance costs Taxation system

Restrictions on dividend remittance Repayment schedules Other factors to b considered Reduced systematic risk Access to capital Agency cost

CHAPTER # 33 RAISING CAPITAL OVERSEAS

KEY TERMS
International Banks International Banking Consists of Transactions in domestic currencies with overseas organisations Transactions that donot take place in Domestic currencies Funds from overseas might b used by multinationals n other large orgs to finance fixed asset acquisition or working cap in domestic bus operatios

Euro Currency Markets

involve the deposit of funds with a bank outside the country of origin of funds n relending these funds 4 a fairly short term (3 months or so) usually at floating rate

Euro Credits
are Medium - Long tem int bank loans which may b arranged by indv banks or by syndicated of banks

Euro Bonds
is a bond issued in a cap markt denominated in a currency which normally differs from that of the country of issue n sold internationally

Euro Equity
Euro equity issue ia an issue of equity in a market outside the enterp's own domestic mrkt

Commercial Paper
is a short term Fin Inst issued by a comp In the form of unsecured promissory notes with a fixed maturity ( 7 - 90 days or even a year ) Issued in Bearer form Issued on Discount bases (interest rate implicit)

Syndicated Credits
A credit in this context is a facility whereby a borrower can borrow funds when required but might infact not takeup the full amount of the facility. This differs from a loan which involves an actual transaction 4 a specified sum 4 a particular period of time ( int rates are usually high )

Multiple Option Facilities

Comprise a variety of Instruments through which comps can raise funds , These includes Note issuence facilities Revolving Underwriting Facilities

SUMMARY
Factors affecting development of Int Banking Globalisation Securitisation

Disintermediation Increased Fore exch n int rate Volatility Deregulation

Int Banks Assists Comps in Following Ways

Financing Foreign trade Financing Cap Markets

Int Cag mng services Providing local banking services Trading in fore exch n currency options Lending n borrowing in euro currency mrkt

Participating in syndicated loan facilities Underwriting Euro bonds Prov of advice n inf

CHAPTER # 34 FINANCIAL CONTROLS WITHIN MULTINATIONALS

KEY TERMS
Treasurship
is a function concerned with prov n use of finance

Treasury Department
Setup by large comps to manage cash n foreign currency

Multilateral Netting In case there are a large number of foreign currency transactions btw didd subsidiaries the obligations of diff subsidiaries may b netted off against each other on multilateral basis........... Reducing cost of transactions

Float
Amount of money tied up btw the time when payment is initiated n the time when the funds become available 4 use in the receipients' bank A/C eg where cheque is sent by post

Cash Management Services

Service provided by bank to its corprate clients, who can obtain the inf about their different bank accounts regularly through computer terminal in the comp's treasury department , linked to the banks computer. The company can then manage to move cash from one account to another n so can manage its cash poition effectively

Cash Pooling
A procedure whereby debit n credit balances held with the same bank by comps within a group are setoff against each other so that int cost can b reduced Usually it involves transfering all the balances in a dummy account at the end of each day

Role of Internationl Holding Company

The level of control exercised by holding comp ll depend on which decisions are the responsibility of holding comp n which is that of the subsidiary Best approach is the coordination with central holdin comp having the final say in major decisions but the local operations having a substantial input in terms of providing inf n opinion

Returns From subsidiaries

Management of the parent comp must decide how the total profits of the group shd be divided btw the parent comp n each of its subsidiaries, which is likely to depend on the transfer prices adopted n how the parent comp shd obtain the cash return that it wants from each of its subsidiaries

Transfer price
is the price at which goods or services are transfered from one process department to another or from one member of group to another

If cash mng is centralised in a multinational, each subsidiary holds only the minimum cash balance required for transaction purposes , all excess funds ll b transfered to central treasury department

CHAPTER # 34 FINANCIAL CONTROLS WITH IN MULTINATIONALS

SUMMARY
Treasureship Includes provision of Capital Short term borrowings Foreign currency management Banking Money market ivestment Treasury Department Role of Treasurer Corp financial objectives Liquidity management Funding mng Currency mng Corporate Finance Related subjects Centralised or Decentralised Cash Management Advantages n Disadvantages Treasury dep as Cost Centre or Profit Centre Short Term Investments Temporary cash surplus may arise due to Increase in profitability Low capital expnditures High cash receipts Utilization of Surplus Keep cash in hand Short term or Long term investment Buy back shares Dividend Forms of Short term Investments Bank Deposit Stock exchange Long term debt instruments Short term debt instruments Certificates of deposits Treasury Bills (IOU issued by govt) Eligible bank bills B O Exchange Local Authority bonds Commercial paper Role of Internationl Holding Company Problems in Treatin sub as profit centre No Advantage of group level strategies No optimal profit maximising behaviour Low manipulation of Global Oppertunities Difficulties of Coordination Geographical differences Different markets currencies n products Political n economic Risk Increased # of decisions to b taken Lack of local knowledge Lack of communication Low motivation 4 managers Returns From subsidiaries n Transfer pricing Basis Determining Transfer pricing Standard cost Marginal Cost Oppertunity Cost Full cost Market price Market price less discount Negotiated price Other factors Shd be consistent with overall aims of org Risk reduction objectives Fund management Interests of Minority Shareholders Tax minimisation Evaluation of Performance of Overseas Operations Use of Financial statements Problems Currency to b used ? Economic env Responsibility reporting Budget analysis Mostly translatyed in parent comp language

Considerations in treating it a Profit Centre Competence of staff Controls Availability of Up to date Information Mng attitude to risk Transfer pricing Performance Evaluation
Payments Between Companies Cheque Advantages Disadvantages Measures to reduce Float
BOE / IOU Bank Drafts

Mail Transfer Telegraphic Transfer Swift International Money Orders Letter of Credits Cash Management Services Cash Pooling Business ethics Problems Different stds of code of conduct Different priorities in different countries Tax advantages may b taken as tax evasion Culture Discussed in detail in chp 11

CHAPTER # 35 MANAGEMENT OF INTERNATIONAL TRADE KEY TERMS Factoring Is an arrangement to have debts collected by a factor comp, which advances a proportion of the money it is due to collect it may also include administration of the client's invoicing, sales accopunting, n debt collection services and credit protection ( insurance ) for the client's debts Forfaiting means provision of medium term finance for export sale os machinery for which the payment is to be made over an agreed number of years. The term may also b applied to short term financing International Credit Unions are organisations or associations of finance houses or banks in different countries (in Europe) having reciprocal arrangements for providing Instalment credit Finance Countertrade is a general term used to describe a variety of commercial arrangements for reciprocal international trade or barter btw coms or other orgs in two or more countries The common characteristic of counter trade is that export sales to a particular market are made conditional upon undertakings to accept imports from that market In some cases it might b the only way of getting an export order SUMMARY Methods For International Finance Risks of Intern Trade Physical Risks (theft etc) Credit Risk Exchange rate Risk Transaction Risk Rewards of Intern Trade More growth potential Strong product life cycle Risk Reduction Eco of Scale Early warning of changes in env Finance for Foreign Trade Time consuming (Dead investment) Greater chances of bad debts Methods of reducing investment in debtors Demand early payments Advance against collection Documentary credit Negotiation of bills / cheques Advantages of using B O Exchange in Int Trade Reducing bad debt risk Export Factoring Advantages Prompt payments to suppliers Optimum stock levels Financing growth through sales Linking finance to volume of sales No problem of Slow paying debtors No need 4 sales ledger dep Forfaiting Parties involved Exporter of cap goods Overseas Buyer wanting Medium term cr Forfaiting Bank Avalising Bank Documentary Credit ( LC ) International Credit Unions Export Credit Guarantee Schemes Objectives Increase in International trade ( due to low inherent risk ) Covering preshipment risks of export Types of Guarantee Post Shipment Comprehensive Selected market guarantee Preshipment finance Counter Trade Types of countertradeing arrangements Barter Counterpurchase Buyback ( paying in the form of output of plant etc ) Offset Switch Trading (3 country investment) Why Countertrade? Countries lack commercial credit or Foreign exchange reserves To boost developing manufacturing industries Political or economic policies To obtain more orders or technology Problems Cost misght exceed expectations Unrealistically high values Increased risk of cncellation Perishable goods Administrative problems Dispute on agreeing costs Costs of Countertrade Fees of specialist consultants Discount or 'disagio' to dispose of the goods Fees payable to any 3rd party Insurance Bank fees