mgt policy handout reveiwer

7/17/2019 Mgt Policy Handout Reveiwer

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MANAGEMENT POLICY REV IE WER

I. INTRODUCTION

For the rest of this chapter, let us look in detail at the meaning of businesspolicy and theimportance of establishing major policies for a firm.

First, it will be useful to define a number of terms. Many books havebeen written in the

United States on the subject of business policy. Someof them are voluminous books on theprinciples of management. Others are merely collections of cases about all aspects ofmanagement. Still others are concerned almost entirely with business strategyvery broadlydefined.

!he authors of this book feel the study of business policy presupposesa significant prior studyin business administration. !hey assume that thestudent or practitioner is already familiar with

general management principles and with such functional areas as marketing management,financial management, production management, and personnel management. Managerialpolicy

"ftas become an integration of the above which forces the individual to draw on these priorpieces and to study the central management of anenterprise from the viewpoint of the chiefe#ecutive.

$ot many people who use this book are now, nor will they become,chief e#ecutives. %hythen should all these other people study businesspolicy& !here are, first of all, many peoplewho, though at the lower ranksof a company, must understand .the policies and goals thecentral purposeof the organi'ation. %hether they be departmental manager, or specialists fardown the ladder of hierarchy, they must have a sense( of the mission, character and

importance of the company as a whole. )fter all* if theindividual does not know the largerpurpose for which he serves, he cannotserve it well.

II. RESPONSIBILITIES OF CHIEF EXECUTIVE

!he chief e#ecutive of a firm is primarily concerned with si# categoriesof action+

. -e, working closely with the board of directors, must elaborate the major policies of afirm.

/. -e, working closely with the board of directors and his topmanagers, must define

the objectives of the firm.0. -e, working closely with his top manager, and develop strategiesand the longrange plan

for achieving these objectives.1. -e must develop an organi'ation which most efficiently carries out the company2s strategic

plan.3. -e, working closely with those top managers, must develop the operating policies

which ease the burden of decisionmaking tocarry out the plan.4. -e, depending upon his philosophy. of management 5degree of decentrali'ation of

authority and responsibilities6, will also beinvolved in controlling the operations of thefirm and in problemSolving


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.

7efinitions

M a jor polii!"#Major policies 5or "company" policies6 deal with the firm2s fundamental nature,its identity, and the direction in which it is e#pected to move. !heyprovide a framework

within which the objectives can be established.

/.. O$j!%i&!"#!he firm2s objectives or goals 5these are two terms used interchangeably6 specify,usually in 8uantitative terms 5e.g.* dollars, percentages, or timeperiods6, where the firme#pected to be at some time in the future.

0. S%ra%!'(9usiness strategy is the approach developed to achieve the objectives which have

been defined. !he development of the strategy is a criticalpart of longrange planning. )firm2s strategy( 5its strategic plan6 defines in detail how the firm is to get from where it .(isnow to where the objectives state it should be at some time in the future

1. Op!ra%i)' polii!"Operating policies are, guides for 7ecisionmaking. !he operating

policies of a firm flow out of its objectives, its strategy, and its organi'ation.!he objectives,plus the policies, define the character or personality of thefirm. !hey provide a frameworkwithin which management can makedecisions that are consistent in themselves and are in

accordance with thestrategic plan and its objectives. Operating policies will be discussed further

in :hapter 3. !he following .discussion focuses on the major policies of the firm.

III. STRATEGY OF USING FOREIGN INVESTOR AND LICENSEES*

PHILIPPINES PERSPECTIVE

One of the key areas of strategy for a firm in a developing country is to usee#isting foreign companies in achieving many of its objectives. :ooperation with a

foreign company can provide a shortcut* it can permitthe attainment of certain goalswhich the local company could possibly achieve with its own resources but at ,alower cost and in much less time. ;t avoids the necessity of inventing the wheel againand again .

)ny form of cooperation with a foreign firm presents certain risks orpotentialproblems. 9efore such cooperation can be effected, the government2s approval mustusually be obtained first. )nd, a mutualagreement cannot be secured unless the goalsof the foreign company are also satisfied.

!his, then, is the essence of strategy. %ithin the conte#t of the changingenvironment andconsidering the firm2s own strengths and weaknesses, howcan a


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products in the control, or it had a local parties. !he

local partner was usually the former importing agent, had some capital and someselling know how but knew nothing about manufacturing and little about managing. acompany. ;n any case, the foreign firm usually had the initiative and gotall the advantages.

;nvariably, the result was an agreement that 2was very favorable to the foreign firm.

Many agreements 5jointventure, licensing, etc.6 that are too propitious to the foreign partner

can be changed in future negotiations but only if the


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help in technical advertising*


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institutions. Moreover, a jointventure agreement will facilitateborrowing from foreign and

international institutions.

%hen the political climate for private investment deteriorates aswhen the government shiftsto a more socialistic stance a joint venture with a foreign firm will often provide

protection from nationali'ation. ) government will usually hesitate to nationali'e foreignassets because ofpotential repercussions f r o m the international financial community.-owever, having a foreign partner can be a negative factor if it is from wrong country*sometimes, foreignowned properties from certain countries become specific targets ofnationali'ation because these provide largedomestic political gains.

!herefore, a partnership with an internationalinstitution, such as the ;nternational Finance:orporation 5the industrialinvestment subsidiary of !he %orld 9ank6, is probably the bestsecurity from this type of risk because obviously, nationali'ation of such a companywould

jeopardi'e relations as in this case with !he %orld 9ank.

Finally, it should be noted that


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!he problem ultimately evolves into one wherein the


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9esides r!%/r) o) i)&!"%,!)%, a foreign partner may have other more specific

goals. For e#ample.

o)! 'oal o0 %-! 0or!i') o,pa)( ,a( $! %o /)1!r%a3! loal ,a)/0a%/ri)' "o a"

%o p!)!%ra%! %-! loal ,ar3!%

;n thissituation, the or majority e8uityinvestments*

they fear that they are helping to establish a competitorand that they will lose the


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market entirely once the license e#pires*

theyfear loss of goodwill if the licensee does not maintain 8uality standards*and Bor

they may feel that they have the organi'ation and resources for a direct investment, so

why should they settle2 for less potential income&

III.7Poi)% o0 &i! o0 %-! 'o&!r),!)%

!he


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/. @conomic development effects

2

!he government will be concerned with the number of jobs created inall countries.

-ow many new unskilled and skilled workers will beemployed&

-ow much training will be provided to increase the numberof skilled workers in the

country&

%hat training will be provided, andin what capacity will local technicians and engineers

be used&

;f foreignmanagers are involved initially, what plans e#ist for their gradual replacement

by


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scheme which will, over the long term give it the largest net gain while still giving thegovernment and the foreign partner room to feel that theirminimum goals, at least, havebeen achieved.

)s noted in earlier chapters, the use of strategy usually comes in only after goals or

objectives have been established. (%e have seen that, for each goal, the strategist has tolist all of the various alternatives for achievingthat goal and to select the optimum strategy

from there. ;n the case ofusing foreign investors and licensees, however, it will, perhaps benecessaryfor managers to review the various, strategies 5and their benefits6 availableand tochoose new goals which they may not otherwise have considered.!his becomes possible

because the potentials of utili'ing foreign partners greatly e#pand the hori'ons of the

managers and of their firms. $ew goalsare suddenly seen as being attainable. 5)fter

selecting their new goals, the managers must, of course, still go through the process of reevaluating all possible strategies and choosing the optimum one for achieving each new

goal.6

T(p!" o0 "%ra%!'i!"

!here are five key subcategories of strategies dealing with foreignpartners. !hese are

discussed below. @ach must .be considered separately and then combined into a major

strategy for the selection of a foreign partnerand for negotiations with him.

IV. THE TRAINING OF PHILIPPINE MANAGERIAL POWER

I% ,a( $! "ai1 %-a% Filipi)o ,a)a'!r" -a&! $!!) %rai)!1 0or %-!ir r!"po)"i$ili%i!"

a" ,a)a'!r" %-ro/'- o)! o0 %-r!! ,o1!"2 or a)( o,$i)a%io) o0 %-!,*

5;6 training through actual e#perience,

5/6 training through themanagement education system, and506 e#posure to training programs inindustry

+.A%/al !9p!ri!)!

Many managers still take pride in claiming that they gained theirmanagerial e#periencethrough actual e#perience or as they put it"through the University of -ard

Enocks." !hese individuals have neverbeen through any formal training in management.!hey are, by and large, individuals who started their own businesses and somehowmanaged tosurvive and .succeed through a process of trial and error. %hile managers whobelong to this category may still be considered significant in n umber, there is a current trend

toward developing an appreciation for more formaltraining in management.

!he persistent growth of


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4.M a)a'!,!)% !1/a%io) "("%!,

Many Filipino managers have undergraduate degrees in businessadministration. Othershave undergraduate degrees in various disciplineswith graduate credits either in economics,business, or public administration.Most of the leading schools are located either in theMetro Manila areaor in :ebu :ity2 which is located in the central part of the country5around1== kilometers south of Manila6.


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@HS):orporation,

Sy:ip, Iorres, Helayo :o., and carlos A. Haldes :o.

Some of the foregoing firms are affiliated with international managementconsultancy firmswhich provide them with insights on the latest management practices in the world.!he

proficiency of Filipino managers with @nglish as a language has2* given them anadvantage over their )sian counterparts in evaluating the applicability of and adoptingmodern management techni8ues in the )sian setting.

V. GENERAL MANAGEMENT PERSPECTIVE AND BUSINESS

POLICY

7etermine the direction of the organi'ation, shape its future, and, when wellimplemented, secure its achievement.

!oday the subject of business policy if taught under wide range of names. )t manyschools the title J Strategic Management is used to relflect the body of research that has

been carried out in the last 3 years in that field. @lsewhere, the problems of economic

strategy are separated from those leadership. !he research and literature that

provide the foundation for this book, as well as its previous editions, find(the coreproblems of general management in the indivisibility of the twintasks ofshaping the purpose of the organi'ation and manaKbig the processes

by "h.ich the organi'ation operates. @#cept for narrow pedagogicalpurposes, it is not even right (to separate from the study of the work ofgeneral management the vital contribution the president can make byleveragingthe daytoday performance of the organi'ation.

;t is precisely to emphasi'e the importance of process and action in the.

Functions and responsibilities of senior management that we have shifted

emphasis in this edition from the more analytic "business policy," with itsemphasis on the core concept of corporate strategy, to the moredynamic"general management," with its balanced view of purpose and process

interacting.

V.+ A Co)!p% o0 : G!)!ral Ma)a'!,!)%;

@ven the brief review that we have made of general managementresponsibilities reveals the comprehensiveness and comple#ity of the job ofchief e#ecutive. ;n order to make sense of the job and to study its (functions, it is useful to consider itin terms of

0 roles of :@O

.S%ra%!'i"%

4.Or'a) i


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T-!"! %-r!! rol!" !)o,pa"" %-! %a"3" o0

.crafting the strategy of the organi'ation and communicating it to the

organi'ation.

/.managing the resource allocation process so that it reflect the strategy.

0.managing the selection, training, and progress of the people organi'ation andbuilding a positive work environment, designing the structure and systems thatprovide .conte#t for the operations both so thatcapabilities increase in areas thatpermit moving 2toward strategic objectives.

1.;ntervening personally where necessary to drive forward and (raise the 8uality of

day to day performance. (

%e shall see as well that the job involves learning from the reactions of suppliers,

customers, competitors, and other constituents interested in the corporation as so to giveorder to the process by which strategy evolves. !his necessary to reflect while in action is

one of the most demanding aspects of the presidents job.

+.T-! G!)!ral Ma)a'!r a" S%ra%!'i"%

)nyone who has taken part in any organi'ed activity, from helping topush a car

out of a snow bank to working for a large corpora tion , knows that there is a

need. to coordinate activity around a common goal and that the goal had betterbe realistic. !his is a key component of the work of leadership, and itinvolves th in ki ng ab ou t what needs to be done, communicating what has

been decided, and motivating others to contribute their efforts. %hen weconsider these activities from the perspective of shaping the purpose of theorgani'ation , we speak of the general manager as strategist. %hile greatintellect is often re8uired to lead the problem solving involved in crafting aneffective corporate strategy* the work of strategist is not merely analytic. )neffective strategy cannot be discovered in a library and delivered to anorgani'ation on paper or in a speechto be implemented. Much as for Moses

after he ac8uired the !en ,:ommandments from the Dord , time and effort are

re8uired to convert a, wise vision into an informed organi'ation. ;n today2s jargonwe would sayit is a "continuous process."

!he role is daunting. !o begin, many take part in the process. !heir ideas andknowledge need to be tapped. )t the same time, careful thought about the futurereveals just how uncertain is our understanding of whatmay happen. @ven if weknow with near certainty that particularconditions will develop, where andwhen are highly unpredictable . ..Deaders soon discover that the strategic 8uestionsthat keep them awake atnight are sufficiently frightening to be disabling to mostof their colleagues. %hile management theorists may value planning that is "outside


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the bo#," leaders know or soon discover that most of their employees are more

than con tent with the comfortable arrangement s i ns id e the bo#. ;ndeed, mostof their colleagues2 careers are premised on the notion thatthe knowledge they haveaccumulated will continue to be useful in organi'ation that will only beincrementally different in the future.

!he 7ifference between great "%ra%!'i"%" a)1 /)!,plo(!1prophets is that the formerable to get others to see the .wisdom of their vision and build coalition that will act on it.;t is this aspect of strategic work rather than formulating the. ;ntellectual content of thedynamic strategy falls almostuni8uely on the chief e#ecutivesshoulder. ;t Nrelates to the

work of marshaling and allocating resources so that the capabilities of theeorgani'ation are directed in line with strategy )nd it involves to a critical degreeshaping the character of the people of the organi'ation and theenvironment in whichthey work. !he strategic aspects of these task mean that they are not just theprovince of the finance and humanresource management organi'ations.

4.G!)!ral Ma)a'!r a" a B/il1!r

%hether an organi'ation is successful over time depends as much onits capabilitiesas on what it is trying to do. )chieving more means that those capabilities must beimproved. %e will see in the cases that sometimes the means to achieve objectivescan be ac8uired in the market as e8uipment or licensed technology. 9ut the

capabilities that are critical to strategic progress reside in the processes and practices

of the organi'ation what the organi'ation knows how to do and is able to do.

Iiving shape to processes and practices involves designing the organi'ation and itssystems for measure and information, for planning, forbudgeting and control, and for

reward and punishment. !hese architectural activities are complemented by choosingventures and projects thatbuild the strength of the organi'ation on. !wo adages 5bothframed beforegender neutral language became prevalent6 guide this highly idiosyncratic

process ") man st walk before he can run," and, ") man2s reach must e#ceed hisgrasp for what2s a heaven for." !he leader2s responsibility forbuilding the organi'ation

re8uires not only driving it to take on ever moredifficult tasks at a pace that is at leastthe e8ual of competitors* but also assessing the conse8uences of failure so that the

inevitable unforeseeable setbacks will not destroy the company. %hen to develop a

new productline, when to enter a foreign market, and when to improve value added bybuilding a scarce skill center inhouse (are decisions that turn on judgments about the

ability of people to grow and the conse8uences of failure !hese vital decisions, in turn,

depend on judgments about the motivationand

skill of people, and their ability towork together.

5.G!)!ral Ma)a'!r a" a Do!r

!hough least glamorous and hardest to conceptuali'e, the way a general manager uses

time in the day has a enormous impact on the organi'ation. -e or her ethical and intellectualstandards, working hours, approach people, attention to customers, and consideration of

family are the models for the senior management. !heir e#ample is education for the


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s u b o rd i n at e e # e c u t i v e . ;n this w a y, the individual shapes thebehavior ,of thecompany and its reputation in the community.

!he general manager also has a critical influence in his or her choices of where or when to

intervene. ;n case of this book we see general managers stepping out of their managerial

role n order 2to work as inventors, sales people, team leaders at critical moments in

the innovationprocess, risk takers, catalysts for change, and simple cheer leaders drivingpeople to feats that they did not know they were capable of achieving.

V.4 T-! S3ill" o0 %-! G!)!ral Ma)a'!r

;n performing these three roles, general managers draw on many skills.2 !he list of usefulabilities is long, and few have all. Ieneral Managersmust have sufficient analytic skillto be capable of diagnosing both the economic and administrative components of a

situation. ;n doing so they must be able to deal with vital detail as well as the big picture.

Gesearch on the intellectual skills of effective managers reveals that their particular

strength is the ability to see patterns in detail and link these to usefulconcepts.

Ieneral managers also need to develop 'oo1j/1',!)%.;n effect, theyneed to be able to

apply their e#perience an analysis 8uickly anddecisively so that problems get resolvedearly. !he cases include manye#amples of managers who have the courage to see thatsomething is not working well, and act on their intuition. :. Goland :hristensen, an author

of earlier editions of this book, defined intuition as "knowledge and @#perience

processed s o as to be instantly available wisdom." Ieneralmanagers learn 8uicklythat they must develop and rely on this resource.

:losely related to judgment but possibly different is the ability to applyspecial kinds ofintuition that )mericans call street smarts because they are not taught in schools. Some

people areN remarkably good at understanding the motives of individuals and are able toanticipate on thatbasishow they are likely to behave. Geasoning in this fashion, they arealso able to deal with individuals and situations with remarkable effectiveness.!hisparticular set of skills is thought of as being ac8uired at birth or whilegrowing up, but ise#tremely valuable.

Ieneral Managers also need creativity, the ability to take risk and ability to integrate.

Gepeatedly, the skills that distuigishes an effective leader is the ability to invent a solution

that turns a problem into an

VI. STRATEGIC ANALYSIS OF INDUSTRY STRUCTURE

Strategic analysis of an industry begins with a careful e#ploration of

five forces listed+

+. T-! %-r!a% o0 E)%r(

$ewcomers t o an industry are an importansource of problems best, they are making

a new investment similar to the e#isting rivals a conse8uence they N are eager to earn a

return. Sometimes, they misunderstand the economics of the industry and cause seriousproblems whilethey are learning. !his was true in the market for ammonia fertili'er when

oil companies entered, as discussed in :hapter. Other times they bring new productor process technology that seriously threatens e#isting participants. !hat is whathappened to the (U.S. car producers ( when theAapanese entered the U.S. market.


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n

%hether the threat of entry is serious depends on whether there are barriers of entry.

9arriers are structural forces that deter potential entrants. Some of the many factors thatcan deter entry are the following+

Eo)o,i!" o 0 "al!

lf the scale of efficient facilities is high, potential entrants may find it impossible 2 to

build a market position fast enough to pay back the re8uired investment. )s wellasproduction, there may be economies in research 5pharmaceuticals6, advertising 5mass

market consumer goods6, and aftersales service 5home appliances6.

A$"ol/%! o"% a1&a)%a'!".

;ncumbents may have positions that are simply not available to entrants. ;t may be,for e#ample, that the good hydroelectric sites in a country or the places for a gas

station at a major intersection are taken. !he producers of wine in the region of

Gomanee :onti have had an unrivaled position sinceGoman times. !here is no moreland there for planting vines. 9ut another commonly ignored source of advantage

comes from constantly decreasing costs in process technology from learning ore#perience 5many manufacturing processes6. Still other advantages unavailable to

entrants come from pioneer grants or subsidies from governments.

Capi%al r!=/ir!,!)%".

) related advantage to incumbents may comefrom the capital re8uired to enter. Oftenfirms may have a soundbusiness idea based on new technology o,r a market concept butfind it impossible to raise the capital needed to compete. !his was theproblem of )ir


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.

the inside of their cans* @ntrepreneurs often find it e#tremely difficult to

change lawyers.

A!"" %o 1i"%ri$/%io).

;t is often hard to bring a new product.(market. %e see this with new consumer

products seeking shelf spa in supermarkets, but there are other e#amplesSony found (Matsushita could virtually shut it out of Aapanese consumer mark .

and in response found it necessary to develop its transistor radial businessfirst in the United States. More dramatically, the O


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For general managers, substitute is a pervasive strategic consideration. !here arealmost always alternative waysfor c ustomer to dealwith aproblem. Iood publictransit is a substitute for automobile travel if the cost is too high. Gailroads fighttruckers over the width and length of vehicles allowed on public roads.

;nterestingly, shifts in prices change the feasibility of substitutes. ;nPP1, with the

near demise of old growth forests, the price of lumber forhome building had risen to

the point where steelwhich was always available began to penetrate the homebuilding market successfully. !he awareness of earth8uakes and hurricanes has also

increased the demand for steel2s strength and fle#ibility. $aturally, lumber companies

will work to find ways of lowering costs and increasing s tr en gth. !he use oflaminate beams is one e#ample. 9ut also important will be the attitudes ofbuilders and adistribution system capable of teaching those builders how to use the substitute product.

5. T-! Po!r o0 S/ppli!r" a)1 C/"%o,!r

!he idea of a series of links from steel manufacturer to builder highlights the e#tent

to which the success of a company at one point in the chain from raw materials tofinal consumer depends upon others in that chain. !he health of the entire chain is

important to profitability. !hus when U.S. car manufacturers lost share to theAapanese, their component and raw material suppliers lost share as well even thoughthe Aapanesecomponent suppliers were not present in the U.S. market. 5!hey only

entered later when the Aapanese manufacturers who were their customers began to

manufacture in the United States.6


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an,

entry threat for customers-istorically the automobile industry has e#ercisedawesome buyerpower in most countries. -igh scale and concentration coupledwith very real threat of vertical integration have enabled car manufacture toe#tract most of the profit from their transactions. ;ndeed, in the United States, thecompanies that manufacture tire.s for the 9.ig !hree seldom make any profit at

all on their original e8uipment business$onetheless* they compete doggedly for.every point of O@M market share because final customer loyalty means theyhave the chance t earn decent profits in the replacement tire market. !he tireindustry particularly instructive on this point because, viewed by itselfconcentration and barriers to e n t r y w o u l d lead one t o e # p e c t h i g h 5profits)s is clear in the Firestone case, however, the power of the buyers has made it avery difficult industry in which to make money6

7. Go&!r),!)%

%hile Michael


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!he ultimate determinant of profitability is the nature of competition among anindustry2s incumbents. ) good e#ample of the range of possibilities is provided by the

cement industry as described in a paper by French researchers. !hey compared the

performance of a regulated cartel among three U.E. producers with intense rivalryamong four French gentlemanly oligopoists, a less concentrated group of Ierman

producers, and cutthroat competition among U.S. rivals.


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Usually when one e#amines an industry in this fashion, there is a certainclear logic to the positions among the competing firms that represents theirinheritance and their current capabilities. Sometimes astrategic weakness will

be revealed that must be overcome if disaster is tobe avoided . Ieneral Motors,

for e#ample, spent a good deal of the PK=s learning that it was a high costproducer of uninteresting cars. Fi#ing bothproblems was strategic but did notinvolve a change in strategy. Most incumbent participants can gain a lot bye#ecuting better. :osts can be lowered, working capital can be reduced,f inancing can be improved and operating and innovating cycle times can beshortened. !he differencescan be staggering.

9ut the opportunity for unusually high sustained profits or the threat of 8uickdestruction almost always develops because an industry is intransition . )nindustry thought to be mature may .be e#posed to newtechnology that willpermit dramatically lower costs, which in turn +willpermit new uses in new

markets. !his is what happened t o the shoe industry with the advent ofinnovative and stylish athletic footwear. )n industry thought of as highly

profitable may change as (critical develop

VIII. VALUES ARE >EY LEGITIMATE ACTION

)t roughly the same time that Dehman was in trouble, the venerable Morgan Iuarantee

bank began a metamorphosis that transformed it from a traditional commercial bank

focused on large corporate and country customers to an investment bank with a very

aggressive trading operation. 9ut because there was a shared understanding of what theorgani'ation was trying to accomplish, and because the values o the institution were

preserved, there was none of the uproar that tore Dehman apart. !he Deadership of

Morgan was able to recogni'e on coming changes in the financial markets and planchanges that were 8uite dramatic involving new kinds of people, modifications of

compensation, and a new culture. !he values and needs of investment bankers and

traders were integrated into the firm. et for the members of the old organi'ation thecore of Morgan remained.

!his is a difficult feat to manage. ;n many companies, the decade of the PK=s seemed to

involve abandoning all but economic values, defined as that would pay the most for the

common shares this week. 7uring theP4=s and PR=s several countries in @ast )sialed by Aapan developed highly competitive e#portoriented economies. !he large openmarkets of the U.S. were their primary target+ !he power of this( attack was com

pounded by a highly overvalued dollar. )merican manufacturers discovered that theircost structures were totally inappropriate to the tradingconditions in which they foundthemselves wages were too high, and tiers of middle management and staff were not

only costly but alsointerfered in the design of an effective competitive response.

!he restructuring of our major corporations has involved massive layoffs. For

managers and workers who lost jobs, the e#periencehas beenone of a broken contract.Somehow, the world in which they werepromised income for a lifetime if they showed


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up and worked hard was shattered . ;t seemed that the managers who remained were paid

large,bonuses for destroying the lives of the losers who were paying the price for the sins

of past company and macroeconomic mismanagement. !hese sentiments were captured inthe sobri8uet given to Aack %ekh, the chief e#ecutive Ieneral @lectric. ;n the first fouryears of his leadership, the firm laid off R=,=== workers. %elch was called "$eutron

Aack" because "he killed( the people and left all the buildings." -e fell the name wasdistinctly unfair because the alternative for I@ if it did not become animble, lean,innovative giant was even more damaging. !he losses would have been far greater, %elch

believed, had he not driven I@ to become a ( highproductivity company.

9ut notice that the legitimacy of these painful actions taken for economic reasons is not

just shareholder return. !he principal justification is competitive conditions. %elch did not

use the language of shareholders value to e#plain his actions. ;nstead his entire thrustdo whatever was necessary to make I@ strong global competitor.

!he cases in this book describe managers in the rich countries like @urope andthe United States competing against wonderfully educated hardworking, low

salaried )sians. 7evising a n ef f e c t i v e re s p o n s e e v o l v e s d i f f i c u l te t h i c a l d i l em ma s . !he managers know that they2deliver to their customersgoods and services of e8uivalent 8uality price despite very different

employment costs. ;n ma ny co u n t r i e s in @urope, managements a bi li ty torespond is substantially constrained legislation. ) social safety net going back to.9ismarck institutionali'es contract that promises reasonabe income and medical

care in retuning willingness to participate in the industrial system. -ow is a

manager make a company competitive if this seems to involve a set of workingconditions that violate the social contract&

Gesearch that has e#amined the challenges faced by managers in midst of

restructuring industries reveals that establishing legitimacy is key task for thoseinvolved in shutting down capacity or me companies. !he manager who leadsthis work must believe like surgeonthat the destruction associated with thecutting is vital tosurvival and future health of the patient

@#ecutives with the re8uired fortitude are rare. ;n one industry that studied, steel in

the United States, a substantial portion of the restructuring of the long productssector 5about half the capacity of the integrated manufacturers6 was accomplished

by one man, !om Iraham, as he move from D!H to UST to )rmco. Mr. 7avid

Goderick, his superior while UST, commented on the problem.

Most e#ecutives tied to steel probably won2t make hard decisions that spenttheir whole lives in steel plants, that came up through the have too many friends,too many neighbors, too many ties. !heyclose to these people to make rationaldecisions.

Our values give us the courage to make hard choices that will influencethe livesof those we are responsible for managing.


23/23

mgt policy handout reveiwer

Documents

management policy rev

financial management

production management

marketing management

theprinciples of management

personnel management

firm2s objectives

subject of business