Business Wisdom

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Business Strategy; there are many techniques ‘any business’ can use to aid in their decision making, for improvements and so forth… so here are just a few of them

 

ORGANIZATIONAL TYPES [MILES & SNOW]

INTRODUCTION

BODY

1. Defender organisations produce products or services with the objective of obtainingmarket leadership. They may achieve their objectives by concentrating on a market niche through specialisation and cost reductions. The market may be mature and stable. The organisation is able to cope with sudden strategic change but would be more comfortable with steady strategic change.

2. Prospector organisations are involved in growing markets where they actively seek new opportunities through innovation. They are typically flexible and decentralised in their approach to the market and able to respond quickly to change. Their objectives are to seek new opportunities. Strategic change is no problem for such companies.

3. Analyser organisations seek to expand but also to protect what they already have. They may wait for others to innovate and delay while others prove new market opportunities before they enter. Large and small organisations can take this route, using mass production to reduce costs but also relying on some areas such as marketing to be more responsive and provide flexibility where required. Strategic change would need careful analysis and evaluation before it could be adopted.

4. Reactor organisations are those that respond inappropriately to competitors and to the more general environment. They rarely, if ever, take the initiative and, in a sense, may have no strategy: they always react to other strategies. Even if they have a strategy, it is entirely inappropriate to the environment and hence the resulting reactor organization is bound to be inadequate. Strategic change will therefore be a problem.

CONCLUSION

In conclusion, the prospector organisation is probably the best able to cope with strategic change. The ability to cope is built into the culture, organisation and management style. Some markets are changing faster than previously, especially with new technologies and new international competition. The ability to cope and even enjoy change is a major competitive advantage.

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STAKEHOLDER & THEIR EXPECTATIONS

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BUREAUCRACY

 

Positive qualities of bureaucracy

1. Reduces favouritism

Bureaucracy sought to bring about objectivity to employee selection by means of qualifications to reduce nepotism. The use of performance-criteria for promotion is an attempt at objectivity. Members of the organization receive salary based on their position in the hierarchy and their seniority. This is an attempt at fairness using set of criteria.

2.  Employee Commitment.

Employees working in bureaucracies have job security because of life time employment. This nurture more loyalty and commitment to the organization. Other benefits to the employee include protection against arbitrary actions of senior management and inducement to master skills that may have limited marketability.

3. Reduces ambiguity

While rules and regulations can be restrictive, they perform the function of clarifying what an employee can or cannot do in any situation. Clarity in lines of authority in a bureaucracy allows an employee to bring decision to a higher authority for action and thus reduces ambiguity in a situation where the lower level employee cannot deal with the problem.

4. Increases uniformity of action

Rules and regulations, well-defined written policies produce standardized response to situations. Employees in a bureaucratic organization are behaving uniformly in a manner under the control of higher level management.

Dysfunctional consequences of bureaucracy

1. Goal displacement

Goal displacement occurs when the organizational goals are displaced by subunit or personal goals.

Robert Merton pointed out that in bureaucracies rules and regulations become so emphasized that they become more important than the ends that they were designed to serve. This result in inefficiencies.

Philip Selznick believed that means could become ends through goal displacement. In bureaucracies, specialization and job differentiation create subunits with different goals. These goals of the different subunits can cause conflict and the achievement of subunit goals can become more important than the organization’s goals.

Alvin Gouldner proposed that rules and regulations besides defining unacceptable behaviours also define minimum levels of acceptable behaviour – people will do just the bare minimum to bet by. Thus if organizational goals are not internalized, the result is apathy and below average performance.

Victor Thompson coined the word, bureaupathic behaviour to describe insecurities by those in authority who use adherence to rules to protect themselves from making errors.

2. Inappropriate Application of Rules and Regulations

This occurs when employees apply formalized rules and procedures blindly in all types of situations without being aware that conditions have changed.

3. Employee Alienation

Bureaucratic organizations are impersonal and members may have the “cog-in-the-wheel” feeling. High routine activities breed boredom and high job specialization makes job-holder feel irrelevant as his task can be easily performed by others.

4. Concentration of Power

Bureaucracies concentrate power in the hands of a few in the higher hierarchy and this does not appeal to people who perceive that values of democracy should prevail.

5. Non-member frustration

following procedures can be a slow process which will frustrate clients or customers who require prompt and efficient service. Many large bureaucracies are also monopolies and customers have limited choice of bringing their business elsewhere.

6. Bureaucracy has become obsolete

The main argument that bureaucracy has become obsolete came from Warren Bennis. To him bureaucracy was developed as a reaction against nepotism, personal subjugation and capricious judgment of managers. he gave four reasons to support that bureaucracy has become obsolete:

a. Rapid and unexpected change

Bureaucracy is designed to manage routine and predictable activities in a stable and predictable environment. Environments are getting unpredictable due to rapid changes, such a model cannot adapt itself against such uncertainty.

b. Growth in size

While bureaucracy is designed to manage growing numbers of people in an organization, growth in itself introduces complexity resulting in increased administrative overheads, tighter control and greater impersonality. All these are dysfunctional consequences.

c. Increasing diversity

Bureaucracy’s rigid rules and well-defined chain of command are unsuitable to manage persons of diverse and highly specialized skills required in a modern organizational setting.

d. Change in managerial behaviour

Bureaucracy is out of step with changing managerial philosophy on managing. Managers are increasingly democratic and organizational values are based more on humanistic-democratic ideals which replaced the depersonalized mechanistic value system of bureaucracy.

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THE BCG GROWTH – SHARE MATRIX

INTRODUCTION

This matrix is one means of analysing the balance of an organisation’s product portfolio. According to this matrix, two basic factors define a product’s strategic stance in the market place:

1.  relative market share – for each product, the ratio of the share of the organisation’s product divided by the share of the market leader;

2. market growth rate – for each product, the market growth rate of the product category. Relative market share is important because, in the competitive battle of the market place, it is advantageous to have a larger share than rivals: this gives room for manoeuvre, the scale to undertake investment and the ability to command distribution. Some researchers, such as Buzzell and Gale,22 claim to have found empirical evidence to support these statements. For example, in a survey of major companies, the two researchers found that businesses with over 50 per cent share of their markets enjoy rates of return three times greater than businesses with small market shares. There are other empirical studies that also support this broad conclusion.23 However, Jacobsen and Aaker24 have questioned this relationship. They point out that such a close correlation will also derive from other differences in businesses. High market share companies do not just differ on market share but on other dimensions as well: for example, they may have better management and may have more luck. However, Aaker  has conceded that portfolios do have their uses, along with their limitations.

Market growth rate is important because markets that are growing rapidly offer more opportunities for sales than lower growth markets. Rapid growth is less likely to involve stealing share from competition and more likely to come from new buyers entering the market. This gives many new opportunities for the right product. There are also difficulties, however – perhaps the chief being that growing markets are often not as profitable as those with low growth. Investment is usually needed to promote the rapid growth and this has to be funded out of profits. Relative market share and market growth rate are combined in the growth–share matrix, as shown in It should be noted that the term ‘matrix’ is misleading. In reality, the diagram does not have four distinct boxes, but rather four areas which merge into one another. The four areas are given distinctive names to signify their strategic significance.

 

Stars. The upper-left quadrant contains the stars: products with high relative market shares operating in high-growth markets. The growth rate will mean that they will need heavy investment and will therefore be cash users. However, because they have high market shares, it is assumed that they will have economies of scale and be able to generate large amounts of cash. Overall, it is therefore asserted that they will be cash neutral – an assumption not necessarily supported in practice and not yet fully tested.

Cash cows. The lower-left quadrant shows the cash cows: product areas that have high relative market shares but exist in low-growth markets. The business is mature and it is assumed that lower levels of investment will be required. On this basis, it is therefore likely that they will be able to generate both cash and profits. Such profits could then be transferred to support the stars. However, there is a real strategic danger here that cashcows become under-supported and begin to lose their market share.

Problem children (Question Mark). The upper-right quadrant contains the problem children: products with low relative market shares in high-growth markets. Such products have not yet obtained dominant positions in rapidly growing markets or, possibly, their market shares have become less dominant as competition has become more aggressive. The market growth means that it is likely that considerable investment will still be required and the low market share will mean that such products will have difficulty generating substantial cash. Hence, on this basis, these products are likely to be cash users.

Dogs. The lower-right quadrant contains the dogs: products that have low relative market shares in low-growth businesses. It is assumed that the products will need low investment but that they are unlikely to be major profit earners. Hence, these two elements should balance each other and they should be cash neutral overall. In practice, they may actually absorb cash because of the investment required to hold their position. They are often regarded as unattractive for the long term and recommended for disposal.

Overall, the general strategy is to take cash from the cash cows to fund stars and invest in future new products that do not yet even appear on the matrix. Cash may also be invested selectively in some problem children to turn them into stars, with the others being milked or even sold to provide funds for elsewhere. Typically in many organisations, the dogs form the largest category and often represent the most difficult strategic decisions. Should they be sold? Could they be repositioned in a smaller market category that would allow them to dominate that category? Are they really cash neutral or possibly absorbing cash? If they are
cash-absorbers, what strategies might be adopted?

CONCLUSION

There are a number of problems associated with the matrix. The most obvious difficulty is that strategy is defined purely in terms of two simple factors and other issues are ignored. Further problems include:

● The definition of market growth. What is high market growth and what is low? Conventionally, this is often set above or below 5 per cent per annum, but there are no rules.

● The definition of the market. It is not always clear how the market should be defined. It is always possible to make a product dominate a market by defining the market narrowly enough. For example, do we consider the entire European steel market, where Usinor would have a small share, or do we take the French segment only, when the Usinor share would be much higher? This could radically alter the conclusions.

● The definition of relative market share. What constitutes a high relative share and a low share? Conventionally, the ratio is set at 1.5 (organisation’s product to share of market leader’s product) but why should this be so? Hence, although the BCG matrix has the merit of simplicity, it has some significant weaknesses. As a result, other product portfolio approaches have been developed.

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THE EXPERIENCE CURVE

INTRODUCTION

In the 1960′s, management consultants at The Boston Consulting Group observed a consistent relationship between the cost of production and the cumulative production quantity (total quantity produced from the first unit to the last). Data revealed that the real value-added production cost declined by 20 to 30 percent for each doubling of cumulative production quantity:

 

The vertical axis of this logarithmic graph is the real unit cost of adding value, adjusted for inflation. It includes the cost that the firm incurs to add value to the starting materials, but excludes the cost of those materials themselves, which are subject the experience curves of their suppliers.

Note that the experience curve differs from the learning curve. The learning curve describes the observed reduction in the number of required direct labor hours as workers learn their jobs. The experience curve by contrast applies not only to labor intensive situations, but also to process oriented ones.

The experience curve relationship holds over a wide range industries. In fact, its absence would be considered by some to be a sign of possible mismanagement. Cases in which the experience curve is not observed sometimes involve the withholding of capital investment, for example, to increase short-term ROI. The experience curve can be explained by a combination of learning (the learning curve), specialization, scale, and investment.

CONCLUSION

The experience curve has important strategic implications. If a firm is able to gain market share over its competitors, it can develop a cost advantage. Penetration pricing strategies and a significant investment in advertising, sales personnel, production capacity, etc. can be justified to increase market share and gain a competitive advantage.

When evaluating strategies based on the experience curve, a firm must consider the reaction of competitors who also understand the concept. Some potential pitfalls include:

  • The fallacy of composition holds: if all other firms equally pursue the strategy, then none will increase market share and will suffer losses from over-capacity and low prices. The more competitors that pursue the strategy, the higher the cost of gaining a given market share and the lower the return on investment.
  • Competing firms may be able to discover the leading firm’s proprietary methods and replicate the cost reductions without having made the large investment to gain experience.
  • New technologies may create a new experience curve. Entrants building new plants may be able to take advantage of the latest technologies that offer a cost advantage over the older plants of the leading firm.
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Maslow’s Hierarchy of Needs

INTRODUCTION

If motivation is driven by the existence of unsatisfied needs, then it is worthwhile for a manager to understand which needs are the more important for individual employees. In this regard, Abraham Maslow developed a model in which basic, low-level needs such as physiological requirements and safety must be satisfied before higher-level needs such as self-fulfillment are pursued. In this hierarchical model, when a need is mostly satisfied it no longer motivates and the next higher need takes its place. Maslow’s hierarchy of needs is shown in the following diagram:

BODY

Physiological Needs

Physiological needs are those required to sustain life, such as:

  • air
  • water
  • nourishment
  • sleep

According to Maslow’s theory, if such needs are not satisfied then one’s motivation will arise from the quest to satisfy them. Higher needs such as social needs and esteem are not felt until one has met the needs basic to one’s bodily functioning.

Safety

Once physiological needs are met, one’s attention turns to safety and security in order to be free from the threat of physical and emotional harm. Such needs might be fulfilled by:

  • Living in a safe area
  • Medical insurance
  • Job security
  • Financial reserves

According to Maslow’s hierarchy, if a person feels that he or she is in harm’s way, higher needs will not receive much attention.

Social Needs

Once a person has met the lower level physiological and safety needs, higher level needs become important, the first of which are social needs. Social needs are those related to interaction with other people and may include:

  • Need for friends
  • Need for belonging
  • Need to give and receive love
Esteem

Once a person feels a sense of “belonging”, the need to feel important arises. Esteem needs may be classified as internal or external. Internal esteem needs are those related to self-esteem such as self respect and achievement. External esteem needs are those such as social status and recognition. Some esteem needs are:

  • Self-respect
  • Achievement
  • Attention
  • Recognition
  • Reputation

Maslow later refined his model to include a level between esteem needs and self-actualization: the need for knowledge and aesthetics.

Self-Actualization

Self-actualization is the summit of Maslow’s hierarchy of needs. It is the quest of reaching one’s full potential as a person. Unlike lower level needs, this need is never fully satisfied; as one grows psychologically there are always new opportunities to continue to grow.

Self-actualized people tend to have needs such as:

  • Truth
  • Justice
  • Wisdom
  • Meaning

Self-actualized persons have frequent occurrences of peak experiences, which are energized moments of profound happiness and harmony. According to Maslow, only a small percentage of the population reaches the level of self-actualization.

Implications for Management

If Maslow’s theory holds, there are some important implications for management. There are opportunities to motivate employees through management style, job design, company events, and compensation packages, some examples of which follow:

  • Physiological needs: Provide lunch breaks, rest breaks, and wages that are sufficient to purchase the essentials of life.
  • Safety Needs: Provide a safe working environment, retirement benefits, and job security.
  • Social Needs: Create a sense of community via team-based projects and social events.
  • Esteem Needs: Recognize achievements to make employees feel appreciated and valued. Offer job titles that convey the importance of the position.
  • Self-Actualization: Provide employees a challenge and the opportunity to reach their full career potential.

However, not all people are driven by the same needs – at any time different people may be motivated by entirely different factors. It is important to understand the needs being pursued by each employee. To motivate an employee, the manager must be able to recognize the needs level at which the employee is operating, and use those needs as levers of motivation.

CONCLUSION

While Maslow’s hierarchy makes sense from an intuitive standpoint, there is little evidence to support its hierarchical aspect. In fact, there is evidence that contradicts the order of needs specified by the model. For example, some cultures appear to place social needs before any others. Maslow’s hierarchy also has difficulty explaining cases such as the “starving artist” in which a person neglects lower needs in pursuit of higher ones. Finally, there is little evidence to suggest that people are motivated to satisfy only one need level at a time, except in situations where there is a conflict between needs.

Even though Maslow’s hierarchy lacks scientific support, it is quite well-known and is the first theory of motivation to which many people they are exposed. To address some of the issues of Maslow’s theory, Clayton Alderfer developed the ERG theory, a needs-based model that is more consistent with empirical findings.

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SUPPLY CHAIN

 

supply-chain-management jenny's

INTRODUCTION

A supply chain is the stream of processes of moving goods from the customer order through the raw materials stage, supply, production, and distribution of products to the customer. All organizations have supply chains of  varying degrees, depending upon the size of the organization and the type of product manufactured. These networks obtain supplies and components, change these materials into finished products and then distribute them to the customer.

Managing the chain of events in this process is what is known as supply chain management. Effective management must take into account coordinating all the different pieces of this chain as quickly as possible without losing any of the quality or customer satisfaction, while still keeping costs down.

The first step is obtaining a customer order, followed by production,storage and distribution of products and supplies to the customer site. Customer satisfaction is paramount. Included in this supply chain process are customer orders, order processing, inventory, scheduling, transportation, storage, and customer service. A necessity in coordinating all these activities is the information service network.

In addition,key to the success of a supply chain is the speed in which these activities can be accomplished and the realization that customer needs and customer satisfaction are the very reasons for the network. Reduced inventories, lower operating costs, product availability and customer satisfaction are all benefits which grow out of effective supply chain management.

 

We classify the decisions for supply chain management into two broad categories — strategic and operational. As the term implies, strategic decisions are made typically over a longer time horizon. These are closely linked to the corporate strategy (they sometimes {\it are} the corporate strategy), and guide supply chain policies from a design perspective. On the other hand, operational decisions are short term, and focus on activities over a day-to-day basis. The effort in these type of decisions is to effectively and efficiently manage the product flow in the “strategically” planned supply chain.

There are four major decision areas in supply chain management: 1) location, 2) production, 3) inventory,  4) transportation (distribution), 5) Production, (6) Supply, and there are both strategic and operational elements in each of these decision areas.

Location Decisions

The geographic placement of production facilities, stocking points, and sourcing points is the natural first step in creating a supply chain. The location of facilities involves a commitment of resources to a long-term plan. Once the size, number, and location of these are determined, so are the possible paths by which the product flows through to the final customer. These decisions are of great significance to a firm since they represent the basic strategy for accessing customer markets, and will have a considerable impact on revenue, cost, and level of service. These decisions should be determined by an optimization routine that considers production costs, taxes, duties and duty drawback, tariffs, local content, distribution costs, production limitations, etc. (See Arntzen, Brown, Harrison and Trafton [1995] for a thorough discussion of these aspects.) Although location decisions are primarily strategic, they also have implications on an operational level.

Production Decisions

The strategic decisions include what products to produce, and which plants to produce them in, allocation of suppliers to plants, plants to DC’s, and DC’s to customer markets. As before, these decisions have a big impact on the revenues, costs and customer service levels of the firm. These decisions assume the existence of the facilities, but determine the exact path(s) through which a product flows to and from these facilities. Another critical issue is the capacity of the manufacturing facilities–and this largely depends the degree of vertical integration within the firm. Operational decisions focus on detailed production scheduling. These decisions include the construction of the master production schedules, scheduling production on machines, and equipment maintenance. Other considerations include workload balancing, and quality control measures at a production facility.

Inventory Decisions

These refer to means by which inventories are managed. Inventories exist at every stage of the supply chain as either raw materials, semi-finished or finished goods. They can also be in-process between locations. Their primary purpose to buffer against any uncertainty that might exist in the supply chain. Since holding of inventories can cost anywhere between 20 to 40 percent of their value, their efficient management is critical in supply chain operations. It is strategic in the sense that top management sets goals. However, most researchers have approached the management of inventory from an operational perspective. These include deployment strategies (push versus pull), control policies — the determination of the optimal levels of order quantities and reorder points, and setting safety stock levels, at each stocking location. These levels are critical, since they are primary determinants of customer service levels.

Transportation Decisions

The mode choice aspect of these decisions are the more strategic ones. These are closely linked to the inventory decisions, since the best choice of mode is often found by trading-off the cost of using the particular mode of transport with the indirect cost of inventory associated with that mode. While air shipments may be fast, reliable, and warrant lesser safety stocks, they are expensive. Meanwhile shipping by sea or rail may be much cheaper, but they necessitate holding relatively large amounts of inventory to buffer against the inherent uncertainty associated with them. Therefore customer service levels, and geographic location play vital roles in such decisions. Since transportation is more than 30 percent of the logistics costs, operating efficiently makes good economic sense. Shipment sizes (consolidated bulk shipments versus Lot-for-Lot), routing and scheduling of equipment are key in effective management of the firm’s transport strategy.uld grow from these decisions.

Production

Strategic decisions regarding production focus on what customers want and the market demands. This first stage in developing supply chain agility takes into consideration what and how many products to produce,and what, if any, parts or components should be produced at which plants or outsourced to capable suppliers. These strategic decisions regarding production must also focus on capacity, quality and volumeof goods, keeping in mind that customer demand and satisfaction must be met. Operational decisions, on the other hand, focus on scheduling workloads, maintenance of equipment and meeting immediate client/market demands. Quality control and workload balancing are issues which need to be considered when making these decisions.

Supply

Next, an organization must determine what their facility or facilities are able to produce, both economically and efficiently, while keeping the quality high. But most companies cannot provide excellent performance with the manufacture of all components. Outsourcing is an excellent alternative to be considered for those products and components that cannot be produced effectively by an organization’s facilities.Companies must carefully select suppliers for raw materials. When choosing a supplier, focus should be on developing velocity, quality and flexibility while at the same time reducing costs or maintaining low cost levels. In short, strategic decisions should be made to determine the core capabilities of a facility and outsourcing partnerships should grow from these decisions.

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PRODUCT LIFE-CYCLE [MARKETING MIX]

INTRODUCTION

No matter how, product needs to be managed carefully. A useful tool for conceptualizing the changes that may take place during the time that a product is on the market is called the ‘product life cycle’. It is quite flexible and can be applied to both brands and product lines.

As product pass through various stages, changes in market and competitive condition between the PLC stages suggests that marketing strategies should be adapted to meet them.

Introduction

The market a product’s sales growth is typically low, and losses are incurred because of heavy development and promotional cost. Companies will be monitoring the speed of product adoption and, if this is disappointing, may terminate the product at this stage.

Growth

In this stage, faster sales and profit growth. Sales growth is fuelled by rapid market acceptance and many products, repeat purchasing. Profits may begin to decline towards the later stages of growth as new rivals enter the market, attracted by the twin magnets of sales growth and high profit potential.

Maturity

The survivors’ battle for market share by product improvements, advertising, and sales promotional offers, dealer, discount and price cutting: the result is decreased on profit margins particularly for follower brands. The need for effective brand building is significant as brand leaders are in the strongest position to resist the pressure on profit margins

Decline

Eventually sales begin to decline as the market becomes saturated, the product becomes technologically obsolete, or customer tastes change. If the product has developed brand loyalty, the profitability may be maintained longer. Unit costs may increase with the declining production volumes and eventually no more profit can be made.

 

Introduction

Strategic marketing objective:  Build

Strategic focus: Expand Market

Brand objective: Product Awareness

Promotion: Creating Awareness

Price: High

Distribution: Patchy

The strategies marketing objectives is to build sales by expanding the market for the product. The brand objective will be to create the product awareness so that customers will become familiar with the product’s benefits. Promotion will support the brand objectives by gaining awareness for the brand and product type, and stimulation trial. Typically price will be high because of the heavy development cost. Distribution will be patch as some dealers are wary of stocking the new product until it has proved to be successful n the market place.

Growth

Strategic marketing objective:  Build

Strategic focus: Penetration

Brand objective: Brand Preference

Products: Differentiated

Promotion: Creating Awareness

Price: Lower

Distribution: Wider

The strategic marketing objective during the growth phase is to build sales and market share. The strategic focus will be to penetrate the market by building brand preference. Product needs to be redesigned to create differentiation, and promotion. Awareness and trial are still important but promotion will begin to focus on repeat purchasers. As development costs are covered and competition increases, prices will fall. Rising consumer demand and increased sales force effort will widen distribution.

Maturity

Strategic marketing objective:  Hold

Strategic focus: Protect share/innovation

Brand objective: Brand Loyalty

Products: Differentiated

Promotion: Maintaining Awareness

Price: Lowest

Distribution: Intensive

As sales peak and stabilize the strategic marketing objective will be to hold on to profits and sales by protecting market share. Brand objectives now focus on maintain brand loyalty, and promotion will defend the brand stimulating repeat purchase by maintain brand awareness and values. Competition may decrease price and profit margins, while distribution will peak in line with sales. Innovation to extend the maturity stage or, preferable, inject growth. This may take the form of innovative promotion campaigns, product improvements, and extensions and technological innovation. Ways of increasing usage and reducing repeat purchase period of the product will also be sough.

Decline

Strategic marketing objective:  Harvest/Manage/Divest

Strategic focus: Productivity

Brand objective: Brand Exploitation

Products: Rationalized

Promotion: Cut/Eliminated

Price: Rising

Distribution: Selective

Failing sales may tempt some companies to raise prices and slash marketing expenditures in an effort to strengthen profit margin. The strategic focus, therefore, will be on improving marketing productivity rather than holding or building slashes. The brand loyalty that has built-up over the years will be channelled elsewhere in the company. Product development will cease, the product line depth will be reduced to the bare minimum of brands and the promotional expenditure cut. Distribution cost will be analysed with a view to selecting only the most profitable outlets.

Conclusion

The term “life cycle” implies a well-defined life cycle as observed in living organisms, but products do not have such a predictable life and the specific life cycle curves followed by different products vary substantially. Consequently, the life cycle concept is not well-suited for the forecasting of product sales. Furthermore, critics have argued that the product life cycle may become self-fulfilling. For example, if sales peak and then decline, managers may conclude that the product is in the decline phase and therefore cut the advertising budget, thus precipitating a further decline.

Nonetheless, the product life cycle concept helps marketing managers to plan alternate marketing strategies to address the challenges that their products are likely to face. It also is useful for monitoring sales results over time and comparing them to those of products having a similar life cycle.

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B2B BUSINESS

B2B stands for Business to Business purchasing. B2B is another term of Organizational Buying Behavior. A purchase identified as Business Purchase when the sold products are used for purposes of further production, resale, or redistribution. The B2B characteristics are similar to Consumer Purchase at certain aspects, but very distinctive at others. Organizations tend to purchase much more technical goods, price-oriented, professionally trained to buy, and risk averse than consumer buyers.

BODY

Given the scale of the purchase, B2B Purchase is usually deemed to have a complex bureaucratic decision making process. In which, it is influenced by many parties from within and outside of the organization. These parties are categorized into 6 groups, referred to as the Buying Centre of Organizations:

Initiator: These people identify a shortage of supply of equipment or materials in the organization, and will trigger the buying process by signaling the purchasing order of the goods. Initiators are usually the line managers, for they are in daily task of checking the stock and equipment. Although, it is unnecessary so that line managers initiate the purchase all the time, some times people at more senior positions can also be the initiator, if the goods carry great strategic value to the business or because it is the 1st purchase.

Influencer: People who have an influence on the purchase are those who look through the criteria and evaluating which brands at how large a quantity to purchase. Influencers make sure that the purchased goods fit into the requirements of the organization without wasting money. Their opinions are often sought over and evaluated highly in the purchase.  Technical experts, Production managers or anyone who’s the end users of the goods can be an influencer; it depends on how the organization values the opinion of the person. This step of Organizational Purchase can be skipped, however, if it is a routine purchase.

Decider: Money talks. Deciders are usually board of directors, the presidents, and heads of department. They are the authority, the wallet of the organization. Any important purchase will have to go through them, for only them who have a large enough responsibility to issue the purchase. Even though, the Initiators and Influencers have agreed, it is still very much possible to cancel the purchase if the deciders say no. in large Multi-National Organizations, it is usually just a decider’s signature on a piece of paper to issue the purchase.

Buyer: These people are in charge of contacting the suppliers, and make the purchase. They also play a part in evaluating buy alternatives as well as selecting the suppliers. Their primary objective, however, is to make the best possible deal with the suppliers.

Gatekeeper: the Gatekeeper usually takes form as agency, who works as a bridge between the organization, buyer, and supplier, seller. It is their job to identify the buying alternatives and inform either the buyer or the seller. The gatekeeper is unnecessary a neutral party, he/she can be representatives of the seller or the buyer whose jobs are to filter out the unwanted deals, or direct the dealers to the deciders.

So far, we have indentified the role players and their roles in an organizational purchase. As a marketer, it is our job to get a firm grip on each one of these members. By saying this, I mean staying in touch with them; quickly identify the needs & wants of the members. For example: User and Influencer would consider features as a very important criteria when purchase the goods, for they are the end users who will then be in frequent contact with goods once purchased. Meanwhile, buyer and decider would be more price-oriented and consider about the risks of purchase also.

It is very hard to figure out when there will be a goods order coming up. Most often, it is the organization that will contact the supplier to inform them about the purchase, or they’ll simply put up a tender and go with the best bid. But if you wait until the buyer puts up a tender, then every supplier will be equal, your supplying company will hold no advantage. The best way to get 1sthand information is from the sellers themselves. By making your company the 1st choice considered by the buyers; and in order to accomplish this, a strong Customer Relationship Management must be developed. If the customer is already making repeated purchase, then make them to repeat even more purchases by giving them special deals, like 10% less in price of each purchased unit for a contract period of 6 months and above, and special treatments, like always ship to them fresh materials, giving them longer credit and so on. If the customer is new to the brand, then we can invite the deciders, buyers or influencer, depends on how important their roles you evaluate in the decision making process, to a buffet dinner or lunch; and then a conference or a showcase can be presented before the dinner; this creates opportunity to bond up with the members of the Buying Centre. Sometimes, large company is even willing to organize company retreats to luxurious resorts, just to get a chance of networking with the members. Despite the cost of organizing such events, B2B suppliers aren’t hesitating because once they can close a deal, the turnover is high enough that it covers up the cost easily. After all, costly events like those do not happen every week. Beside, in the long-run, if the organization gains trust on you, they will usually order in fixed sequences and are stable business partners.

CONCLUSION

Each of Decision Making Unit (DMU) certainly plays an important role in the decision making process. It is unnecessary, however, that a marketer has to approach each of every single unit when there is a potential purchase order. This is because the roles played in the decision making process of each Decision Making Unit may vary, or simply no role at all; it depends on what sort of buying task we are talking about. An organization buying situation whereby the organization has had no past experience with the purchase of product if the kind required; this is referred to as New Task Buying. Examples of New Task Buying: Custom Furniture, Installed Components, Buildings, Weapon Systems. Most often, all the DMUs will be involved in the process of decision making. An organization buying situation in which the organization wishes to buy a goods that has been purchased previously but changes in either the supplier or some features and elements of the previous order. Examples are: New Vehicles, Electronic Equipment, Consultants, Computer Equipment. In this situation, it may or may not involve all of the DMUs. It depends on how highly the purchased goods is valued by the organization. Another situation is called Straight Rebuy. Same goods, same amount, same suppliers and at fixed sequence, these are the characteristics of a Straight Rebuy. It often involves DMUs of lower level like the Line Managers

It is important to understand the roles played by each DMUs in the B2B decision making process. It is even more important so to understand that each group in an organization may not play a same role every time. Therefore, the ability to clarify the buying task and identify the DMU roles played by what group is needed in order to launch an excellent marketing strategy toward Organizational Buying.

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THE USE OF ‘SPC’ – STATISTICAL PROCESS CONTROL

INTRODUCTION

Since the responsibility for output lies with the producing department, the responsibility for achieving the appropriate quality in the transformation process must also lie with production/operations. To fulfill this responsibility, staff must be provided with the tools necessary

1) Know whether the process is capable of meeting the requirements.

2) Know whether the process is meeting the requirements at any point in time.

3) Make a correct adjustment to the process when it is not meeting the requirements.

Statistical process control (SPC) is the application of statistical methods to the monitoring and control of a process to ensure that it operates at its full potential to produce conforming product. Under SPC, a process behaves predictably to produce as much conforming product as possible with the least possible waste. While SPC has been applied most frequently to controlling manufacturing lines, it applies equally well to any process with a measurable output. Key tools in SPC are control charts, a focus on continuous improvement and designed experiments.

Much of the power of SPC lies in the ability to examine a process and the sources of variation in that process using tools that give weight to objective analysis over subjective opinions and that allow the strength of each source to be determined numerically. Variations in the process that may affect the quality of the end product or service can be detected and corrected.

With its emphasis on early detection and prevention of problems, SPC has a distinct advantage over other quality methods, such as inspection, that apply resources to detecting and correcting problems after they have occurred.

In addition to reducing waste, SPC can lead to a reduction in the time required to produce the product or service from end to end. This is partially due to a diminished likelihood that the final product will have to be reworked, but it may also result from using SPC data to identify bottlenecks, wait times, and other sources of delays within the process. Process cycle time reductions coupled with improvements in yield have made SPC a valuable tool from both a cost reduction and a customer satisfaction standpoint.

In mass-manufacturing, the quality of the finished article was traditionally achieved through post-manufacturing inspection of the product; accepting or rejecting each article (or samples from a production lot) based on how well it met its design specifications. In contrast, Statistical Process Control uses statistical tools to observe the performance of the production process in order to predict significant deviations that may later result in rejected product.

Two kinds of variation occur in all manufacturing processes: both these types of process variation cause subsequent variation in the final product. The first is known as natural or common cause variation and consists of the variation inherent in the process as it is designed. Common cause variation may include variations in temperature, properties of raw materials, strength of an electrical current etc. The second kind of variation is known as special cause variation, or assignable-cause variation, and happens less frequently than the first. With sufficient investigation, a specific cause, such as abnormal raw material or incorrect set-up parameters, can be found for special cause variations.

For example, a breakfast cereal packaging line may be designed to fill each cereal box with 500 grams of product, but some boxes will have slightly more than 500 grams, and some will have slightly less, in accordance with a distribution of net weights. If the production process, its inputs, or its environment changes (for example, the machines doing the manufacture begin to wear) this distribution can change. For example, as its cams and pulleys wear out, the cereal filling machine may start putting more cereal into each box than specified. If this change is allowed to continue unchecked, more and more product will be produced that fall outside the tolerances of the manufacturer or consumer, resulting in waste. While in this case, the waste is in the form of “free” product for the consumer, typically waste consists of rework or scrap.

By observing at the right time what happened in the process that led to a change, the quality engineer or any member of the team responsible for the production line can troubleshoot the root cause of the variation that has crept in to the process and correct the problem.

SPC indicates when an action should be taken in a process, but it also indicates when NO action should be taken. An example is a person who would like to maintain a constant body weight and takes weight measurements weekly. A person who does not understand SPC concepts might start dieting every time his or her weight increased, or eat more every time his or her weight decreased. This type of action could be harmful and possibly generate even more variation in body weight. SPC would account for normal weight variation and better indicate when the person is in fact gaining or losing weight.

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