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IA & EV
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IV; internal Verifier & EV: External Verifier
A mission is a general expression of the overall purpose of the organization, which ideally is in line with the values and expectations of major stakeholders and concerned with the scope and boundaries of the organization.
So with the help of mission, organization can understand that," what business are we in?" by which strategy organization can achieve their mission for e.g. Vision and mission of Nokia is "connecting people together". So Nokia take human approach to technology. They are focusing people to bring/connect closer and then growth will follow. It is clear that for Nokia customers are at top priority that's why Nokia will continue to be a growth company and will expand to new market and businesses. This is the reason for Nokia to become the brand which is most loved by the customers.
A strategic intent or vision is the desire future state of the organization. It is an aspiration around which a strategist, a chief executive might seek to focus the attention and energies of members of the organization.
Goal means a general aim in line with the mission. It is a well quantitative in nature.
The Fig.1 is key to understand how financial management fits into overall business strategy.
The business should recognize its overriding purpose or mission and develop board based goals for the business to ensure it fulfils that purpose.
Each goal is then further broken down into detailed commercial and financial objective, each of which should have appropriate identifiable, measurable target so that progress towards them can be monitored.
Fig.1 (Reference 2)
To understand this we will consider following example: Kingston University, London have mission to promote participation in higher education and to equip its students to make effective contributions to society and the economy.
So its aim is to be a comprehensive and Community University and ambition is to create a university that is not constrained by present possibilities, but has a grander and more inspirational vision of its future.
Goals of Kingston university :
To provide all current and future students with equal opportunities to realize their learning ambition.
To provide a high quality courses and supportive environment that encourages critically learning and develops personal, social and employable skill.
Help individual, society and economy by authorizing research.
To make university's structure, culture and system to fulfill its mission and goals.
To manage and develop its human, physical and financial resources to achieve the best academic value and value for money.
With the help of mission, vision and goals an organization is able to make significant growth in their business. In other words mission help organization to stand in market where they want to be and vision help as an inspiration to do that.
Following theories will justify value of mission and objective.
Individual aspiration and trusty motive: such as the Salvation Army, cancer research society, education provider etc. all this type of organization are work with their mission for social help.
Entrepreneur risk taking: In business market entrepreneur takes big risk to enter in market with high cost of establishment to compete with current organization. If new businesses have long term mission and vision then only they can do it.
Not for profit: All the organization are consider for public sector such as, universities, health-care, transport etc. their mission is to provide services to public as well as earn revenues and also need to make surplus in order to be able to invest in future.
Corporate governance is concerned with the structures and systems of control by which manager are held accountable to those who have a legitimate stake in an organization.
It is an important issue for organization for this reasons
The separation of ownership and management control of an organization means that most organizations operate within hierarchy, or chain, of governance.
Corporate scandals since the late1990s have increased how different parties in the governance chain should interact and influence each other and also relationship between shareholders and boards of business.
Increased accountability to wider stakeholder interests, in particular corporations need to be more visibly accountable and responsible not only to owners and managers in the governance chain but to wider social interest.
Different Governance structures:
The governing body of an organization is typically a board of directors. The primary responsibility of a board is to fulfil the wishes and purpose of the primary stakeholders.
In private sector some parts of business is hold by shareholders and in other part broad or different stakeholders. While in public sector the governing body is accountable.
There are at general level two governance structures:
The shareholder model and stakeholder model.
A shareholder model of governance:
Shareholders have legitimate primacy in relation to the wealth generated by the corporations, so maximizing shareholder value benefit other stakeholders too. In principle, the trading of shares provides a regulatory mechanism for maximizing shareholder value, given that dissatisfied shareholders may sell their shares, the result being drop in shares price and the threat of takeover for underperforming firms.
Advantage of shareholder model:
1. Benifit for investors.
Relative to stakeholder model Investor gets a higher rate of return. Shareholder can reduce their risk through diversifying their holding in an equity market.
2. Benifit to economy.
Investors are the higher risk-taker; there is a higher likelihood of encouragement of economic growth and entrepreneurship.
3. Benifit for management.
The separation of ownership and management makes strategic decisions as per different demands and constraints of financial, labour and customer market. A diversified Shareholding gives management to take proper decision so that firm performs well.
Disadvantage of Shareholder Model:
1. Disadvantage for investors.
Shareholdings prevent close monitor on management. This might result in the manager sacrificing shareholder value to pursue their own agendas.
2. Disadvantage for economy.
As lack of management control may take decision to benefit to their own career. This may be focus on short-term gain at the expenses of long-term project.
3. Corporate reputation and top management greed.
The lack of management control allows huge compensations, the manager rewarding themselves in form of salary, bonuses, stock options. for e.g.in the USA CEOs have 531times more compensation than their employees. In another latest case BP has to pay to Mr. Hayward (chief executive) total leaving package was worth £43millons when his record retirement pot and shares from a long-term incentive plan were taken it to account.
The stakeholder Model of governance:
This is founded on the principle that wealth is created, capture and distribution by a variety of stakeholders. This may include shareholders also include other investor such bank, employee or their union representative.
Advantages of stakeholder model
1. Advantages for stakeholder.
Apart from the argument that the wider interest of stakeholder are taken into account, it is also argued that employee influence in particular is a deterrent to high-risk decisions and investment.
2. Advantages for Investor.
There may be closer level of monitoring with management, investor having greater access to information within firm.
3. Long - term horizons.
Major investor like bank or other companies are likely to investments as long term, which reduce pressure for short term result as against long-term performance.
Disadvantages of stakeholder model.
1. Disadvanage for management.
Close monitoring could lead to interference which results to slowing down of decision process which result of loss of management objectivity.
2. Disadvantages for Investor.
Due to lack of pressure from shareholders, long-term investments are made on project where the returns may be below market expectation.
3. Disadvantages for the economy.
There are fewer alternatives for raising finance, thus limiting the possibilities of growth and entrepreneurial activity.
To gain an understanding of stakeholder influence Stakeholder mapping can be used .It consist of two issues
1. How interested each stakeholder group is in impressing its expectations on the organization's purpose and choice of strategy.
2. Stakeholders power to do so.
(Refer to figure 2)
It describes the context within which a strategy might be pursued by classifying stakeholders in relation to the power they hold and the extent to which they are likely to show interest in supporting or opposing a particular strategy. Matrix helps in thinking through stakeholder influences on the development of strategy. For example in some countries unions may be very weak but may be represented on supervisory boards, bank may also take part in strategy in some countries.
Stakeholder mapping might help to understand following issues.
In determining purpose and strategy after consideration of stakeholder expectations.
Whether the actual level of interest and power of stakeholder properly reflect the corporate governance framework.
Whether repositioning of certain stakeholders is desirable and feasible.
Maintaining the level of interest or power some key stakeholder may be essential.
Nature of strategic Business management and planning
Strategy is the direction and scope of an organization over the long term, which Achieves advantage in a changing environment through its configuration of Resources and competence with the aim of fulfilling stakeholder expectations.
Corporate strategy is the identification of the purpose of the organization and the plan and actions to achieve that purpose.
Strategic Business Management
strsStrategic Business Management
Business level strategy ategy
Corporate level strategy
Corporate level strategy :
This strategy is concerned with competing for customer, generating value from the resources and the underlying principle of the sustainable competitive advantage of those resources over rival companies.
Business level strategy :
Business level strategy of the firm is the match between its internal capability and its external relationships. It describes how it responds to its suppliers, customers, competitors and the social and economic environment within which it operates.
So there is no universal agreed definition of strategy some strategy writer such as Campbell and other have concentrate on corporate level activity while other such as Poter has concentrate on business level.
In corporate Strategy some time it is not simple to implement strategy mainly because some time people such as manager, employee, supplier and customer. Any of this people may choose to apply their owe business judgment to select corporate strategy. Another is Environment may change radically as the strategy is being implemented. This will force to change chosen strategy. so this reason in strategic development we need to chose distinction between content, context and process.
Context / Environment
Content / Action.
Figure.4 : (Reference 11)
Hierarchy level of management :
Executive: Concern with what is it about the business or in which area business is conducted.
Tactical level: competitiveness of business and effectiveness.
Operation level: Concern with operation of firm / Business.
Strategy in Action
The strategic position
1)Environment 1) Business Level 1) Process
Purpose 2) International 2) Resourcing
Culture 3) Evaluation 3) Practice
Capability 4) Innovation 4) Changing
5) Corporate Level 5) Organizing
The strategic Position :
The Strategic position is concerned with the identifying impact on strategy of the external environment, an organization's strategic capability i.e. resources and competence and the expectation and influence of stakeholders.
Strategic Choices :
A strategic choice involves which strategy business need to adopt for business level or at corporate level to compete in market.
Strategy in action :
The strategy which chosen that should be in practice.
Planning and strategy :
Strategy planning and strategy thinking is two different aspect .
Planning leads organization towards their goal, where organization will stand in future and how to go there. While Strategy thinking process capture that manager learn from previous experiences and organization hard data. Poor Planning or lack of planning can hurt organization's performance.
For. e.g. clothing retailer Merry-go-Round, a once ubiquitous presence in mall across America., slid into bankruptcy because of poor planning. Because of top manager's lack of vision in perceiving market direction and demographic trends, weak planning efforts regarding acquisitions and growth, and the failure to prepare for management succession to kill a 1,500 store, $1billion nationwide chain.
Strategy is not the result of strategic planning but the product of number of processes.
There are essential three interrelated processes that can contribute to the establishment as such a strategy.
Strategic thinking: creative so enterprise could develop.
Strategic planning. : Systematic to develop a plan of action.
Opportunities decision making. : Effective reaction to unexpected threats and opportunities.
Strategy in global environment:
Internationalization in business raises choices about which countries to compete in and how to manage business across the borders. Such as Nestle, McDonald's, Toyota are large multinational firms around world. This firms has places an international strategy to compete in market. International strategy depends on both the external environment and organizational capabilities. So internationalization drivers on capabilities side it emphasizes international and national sources of advantages.
According to George yip's following four drivers are considered when to make international strategies.
(Refer to figure 7 )
Market Drivers consist of mainly 3 components
The presence of similar customer need and taste. e.g. credit card company visa.
The presence of global customer .e.g. customer of ford or Toyota.
Transferable marketing. e.g. coca- cola is more successful in similar ways across the world.
Cost drivers consist of following components.
1) Scale economy: increase volume beyond what a national market requirement. Companies from small countries have advantage then big countries, vast market at home.
2) Country specific: they take advantage of country specific as production might take place where labour are cheaper and design may take place at big cities.
3) Favorable logistics: i.e. light material such as microchips are easy to easy source then bulky material such as furniture.
1) Trade policy
2) Technical standards
3) Host government policy.
As government policy favorable and helping companies to do business more and more company will attract to that countries.
Competitive drivers :
Interdependence between countries: for e.g. a business plan in Mexico serving by American as well as Japanese companies.
Competitors' global strategies: The pressure to adopt a global strategy involves globalised competitors.
There are many other different factors can support in determining an internationalization strategy in particular industry.
So to build a competitive business strategy every organization needs to understand the various drivers in the market and how they affect their organizational goals and objectives.
Section II (Case study)
The Salvation Army : A non-profit organization
As a Christian mission and UK origin still it is working successfully across regardless of age, gender, colour or creed, religious, language, national and ethnic device, to the poor, destitute and hungry by meeting both their physical and spiritual needs.
In a world increasingly beset by both natural and human made disasters the Salvation Army has faced increasing pressures in terms of both scale and complexity.
The Salvation Army is a global not profit organization.
The Salvation Army's stated mission is to perform evangelical, social and charitable work.
Activity undertaken by The Salvation Army :
Social programme :
The Salvation Army provides residential accommodation for almost every conceivable need group ranging from mother and baby through children to elderly and disable. It also provides remand and probation facilities. The Salvation Army has traditionally been able to work in partnership with both statutory and voluntary agencies.
Health care and hospital provision :
The development of mobile clinics and outpatients service has been significant and the Army has been active in responding to HIV / Aids.
The Salvation Army has significant role in world as total number of pupils catered for globally is greater than the number of undergraduates in the whole of the UK.
2.2 Growth of The Salvation Army
The original focus upon poverty and the associated issues links to alcohol and gambling has remained a strong part of the core of the origination. The Salvation Army does not accept any donation or grants derived from these sources. Therefore it does not apply for monies from the UK National Lottery. However, in other respect The Salvation Army has been relatively flexible about accepting money from a range of sources. The pragmatic view has been expressed that money can be cleansed by being put to good use.
2.3 The international and growth of the Salvation Army.
From its beginnings in the UK, The Salvation Army has become a global organization. The increase in the number of soldiers and in 2003 there were over 1,024,000 senior soldiers worldwide. The organization employed that year about 110,000 people.
However, the relationship with the governments of the countries in which it operates does not always run smoothly.
e.g. the press made much of the attempts by the Moscow City government to ban The Salvation Army in Russia .
3.1 Problem Face by The Salvation Army
A decline and Ageing membership.
A growing demand for the service it provided.
Difficulties as an international organization in relating to youth cultural.
If there were some innovation, there was some group who made it difficult to resource innovation.
A move in social policy from the institutional care that it is social service had traditionally provide to more community based provision.
3.2 Strong field of The Salvation Army
1. A commitment to help the neediest.
2. A willingness to undertake practice work as well as proclaim the gospel.
3. Trustworthiness and sincerity, which made it an organization people are comfortable to work with and contribute to.
4. A strong caring ethos.
5. An understanding of the need of people today.
So it seems that the strategic framework need for the Salvation Army to focus requirement fragmented society. They need to concentrate on area where it can set the require standard and maintain the balance between being a religious organization and a social organization.
Fig.2 Reference 7
Stakeholder mapping: the power / interest matrix
Level of interest
Figure 7. Reference 14