November 9, 2021

COMPETITIVE ADVANTAGE  Porter based on the five forces proposed three principle strategies which he called Generic strategies that could be used to maintain a sustainable competitive advantage namely: Overall cost leadership-this is where a firm sets out to become a low cost producer. The firm should offer customers product quality and features that are comparable to its competitors but also command prices if it is to be profitable. This can be achieved through; Sustained capital investment in research and development Use of process engineering skills i.e. simplifying the production process. Minimize wastage Tight cost control Negotiating lower prices with suppliers. Differentiation-this is where a firm finds one or more unique attributes for which customer are prepared o pay a premium price. It ca be based on the products themselves or their delivery. a firm that attains differentiation will be an above average performer as long as its price premium exceeds that extra cost incurred in providing the unique features. This strategy can be achieved by strong product design, superior marketing techniques, creativity, research, quality improvement and improved packaging. Focus-this basically means choosing a market segment or group of segments with the view to attaining competitive advantages by catering for the unique requirements of those segments. The focus strategy can be based on attaining cost advantage or developing differentiation advantage. this strategy however can only succeed if section of the market is highly loyal to the products of the firm. It is however limited by imitations and loss of demand. Strategy Formulation Constraints In order for managers to formulate useful strategies, they must be aware of certain organizational constraints. Some of the major ones are: Availability of financial resources-Even when a particular strategy appears optimal for an organization, serious consideration must be given to where the money to finance the strategy is going to come from. Attitude toward risk-Some firms are willing to accept only minimal levels of risk, regardless of the level of potential return. Organizational capabilities-Some otherwise excellent strategies may require capabilities beyond those an organization currently possesses.

ANSOFF’S PRODUCT MARKET GROWTH MATRIX The Ansoff Growth matrix is a tool that helps business to decide their product and market growth strategy. Ansoff’s product/market growth matrix suggests that a firm’s chances to grow depend on the type of product (new or existing products) and the market it caters to (new or existing markets). The output from the Ansoff product/market matrix is a series of suggested growth strategies that set the direction for the business strategy. These are described below: a) Market Penetration (Same product – Same Market) Market penetration is the name given to a growth strategy where the business focuses on selling existing products into existing markets. Market penetration seeks to achieve four main objectives: Maintain or increase the market share of current products – this can be achieved by a combination of competitive pricing strategies, advertising, sales promotion and perhaps more resources dedicated to direct selling Secure dominance of growing markets Restructure a mature market by driving out competitors – this would require a much more aggressive promotional campaign, supported by a pricing strategy designed to make the market unattractive for competitors Increase usage by existing customers – for example by introducing loyalty schemes b) Market development (Same product – New Market) Market development is the name given to a growth strategy where the business seeks to sell its existing products into new markets. There are many possible ways of approaching this strategy, including; New geographical markets- for example, exporting the product to a new country New product dimensions or packaging New distribution channels Different pricing policies to attract different customers or create new market segments c) Product development (New product – Same Market) Product development is the name given to a growth strategy where a business aims to introduce new products into existing markets. This strategy may require the development of new competencies and requires the business to develop modified products which can appeal to existing markets. d) Diversification (New product – New Market) Diversification is the name given to the growth strategy where a business markets new products in new markets. This is an inherently more risky strategy because the business is moving into markets in which it has little or no experience. For a business to adopt a diversification strategy it should have a clear idea about what it expects to gain from the strategy and an honest assessment of the risks. Threat of New Entrants New entrants to an industry can raise the level of competition, thereby reducing its attractiveness. The threat of new entrants largely depends on the barriers to entry. High entry barriers exist in some industries (e.g. shipbuilding) whereas other industries are very easy to enter (e.g. estate agency, restaurants). Key barriers to entry include Economies of scale Capital / investment requirements Customer switching costs Access to industry distribution channels The likelihood of retaliation from existing industry players. Threat of Substitutes The presence of substitute products can lower industry attractiveness and profitability because they limit price levels. The threat of substitute products depends on: Buyers’ willingness to substitute The relative price and performance of substitutes The costs of switching to substitutes Bargaining Power of Suppliers Suppliers are the businesses that supply materials & other products into the industry. The cost of items bought from suppliers (e.g. raw materials, components) can have a significant impact on a company’s profitability. If suppliers have high bargaining power over a company, then in theory the company’s industry is less attractive. The bargaining power of suppliers will be high when: There are many buyers and few dominant suppliers There are undifferentiated, highly valued products Suppliers threaten to integrate forward into the industry (e.g. brand manufacturers threatening to set up their own retail outlets) Buyers do not threaten to integrate backwards into supply The industry is not a key customer group to the suppliers Bargaining Power of Buyers Buyers are the people / organizations who create demand in an industry The bargaining power of buyers is greater when There are few dominant buyers and many sellers in the industry Products are standardized Buyers threaten to integrate backward into the industry Suppliers do not threaten to integrate forward into the buyer’s industry The industry is not a key supplying group for buyers Intensity of Rivalry The intensity of rivalry between competitors in an industry will depend on: The structure of competition – for example, rivalry is more intense where there are many small or equally sized competitors; rivalry is less when an industry has a clear market leader The structure of industry costs – for example, industries with high fixed costs encourage competitors to fill unused capacity by price cutting Degree of differentiation – industries where products are commodities (e.g. steel, coal) have greater rivalry; industries where competitors can differentiate their products have less rivalry Switching costs – rivalry is reduced where buyers have high switching costs – i.e. there is a significant cost associated with the decision to buy a product from an alternative supplier Strategic objectives – when competitors are pursuing aggressive growth strategies, rivalry is more intense. Where competitors are “milking” profits in a mature industry, the degree of rivalry is less Exit barriers – when barriers to leaving an industry are high (e.g. the cost of closing down factories) – then competitors tend to exhibit greater rivalry.

FORMULATING CORPORATE LEVEL STRATEGIES Strategic options / Grand Strategies Based on the above strategies a firm can take the following grand strategies at corporate level: Integration strategies Forward integration–this involves gaining ownership or increased control over distribution channels. It eliminates resale mark up, hastens inventory turnover and allows firm to quickly take advantages of falling component prices. It is preferred in the following circumstances: When present distributors are expensive unreliable or incapable When availability of quality distributors is limited When industry is growing steadily When firm has capital and human resources needed. Backward strategies– this is a strategy of seeking ownership or increased control over suppliers. It is appropriate under the following conditions:Delmonte. When present suppliers are expensive ,unreliable or incapable When number of suppliers is small and competitors are many. When the firm has enough resources Horizontal strategies–this is a strategy of seeking ownership or increased control over competitors. It may take form of mergers or takeovers. It is appropriate under the following conditions: When integration enables the firm to gain monopolistic characteristics When economies of scale provide a major competitive advantages When firm have enough resources. When there is need to diversify. Intensive strategies These are mainly strategies that attempt to use the firm’s strengths in order to exploit opportunities and minimize threats. They include: Market penetration strategy–this seeks to increase the market share of present products in present markets through marketing effort. It may be used alone or in combinations with other strategies. it involves increasing the number of sales personnel, increasing advertising and sales promotion. It is preferred in the following conditions: When the current market is not saturated When the usage rate of the current customers can be increased When market share of competitors has declined. Market development strategy-this involves introducing present products into new markets which could be domestic or international. It is preferred under the following conditions: When existing distribution channels are reliable and cheap When the firm is very successful When a new unsaturated market exists. When the organization has excess production capacity When the present market is saturated. Product development strategy– this seeks to increase sales by improving or modifying present production. It usually entails large research and development expenditure. Product development is an option under the following circumstances: It the organization has successful products that are maturing When the industry has rapid technological development When major competitors offer better quality products When the firm has a strong research and development team. Diversification strategies Concentric diversification-this is the strategy where the firm introduces new but related products for present customers. It is appropriate under the following conditions: When the firm is competing in a slow growth industry If adding new but related product can enhance sales of the current product. When the firm has a strong management that can manage both products When the current product are in decline stage. Horizontal diversification– this is a strategy where the firm adds new unrelated products but for the current consumers. It is necessary under the following conditions: When it can significantly add to the revenue of the organization When the industry is highly competitive but without growth When the present channels of distributions can be used to market the new products. Conglomerate diversification-this is a strategy of adding new unrelated products without necessarily focusing on the current consumers. It is necessary under the following conditions. When the basic industry is experiencing decline. When the firm has excess resources that need to be utilized. Where there exists financial synergy between two industries. Defensive strategies Joint ventures-these occur when two or more companies form temporary partnership for the purpose of capitalizing on some opportunities. The conditions necessary for joint includes: when the distinctive competences of the two companies can complement each other when there is need to introduce new technology when the project is potentially very profitable but requires a lot of resources and high risk when a private organization wishes to get political protection Retrenchment strategy-this occurs when an firm regroups through cost and asset reduction t reverse a declining sales and profit trend. it is sometimes called turn around or re-organization strategy. It is designs to fortify the firm on its basic distinctive competencies. It involves selling off assets to raise capital needed, reducing product lines, closing marginal business, reducing number of employees and institutionalizing expenses control systems so as to operate within limited resources. Divestiture-this is selling of a division or part of the firm. it is used to raise capital for further strategic acquisitions or investments. it sometimes may be part of the overall retrenchment strategy to get rid of unprofitable businesses. Liquidation–this is selling of the companies assets for their tangible worth. it is a recognition of defeat. it becomes the best option under conditions such; When the firm has unsuccessfully pursued both retrenchment and divestiture When the shareholders can minimize losses by selling off the assets.   Developing Business level strategies. They are Formulated using Portfolio analysis. have to assess their respective attractiveness and decide how much support each unit deserves. PORTFOLIO ANALYSIS MODELS: Portfolio analysis is done through all or any of the following models: BCG Portfolio Matrix.– BCG is acronym for Boston Consulting Group. Bigger Companies that are having units to be organized into strategic business units face the challenge of allocating resources among themselves and thus compete even within the group. In the early 1970’s the Boston Consulting Group developed a model for managing a portfolio of different business units (or major product lines). The model states that where a firm has portfolios which are autonomous divisions or profit centre of the firm, and the firm competes in different industries, a different strategy may need to be developed for each business unit. The BCG strategy is designed to enhance a multi-divisional firm’s effort to formulate strategies. This matrix graphically portrays differences among the divisions in terms of relative market share and industry growth rate. Question Mark? This connotes low market share, competing in high growth

STRATEGY FORMULATION  Strategy formulation is the process of determining appropriate courses of action for achieving  rganizational objectives and thereby accomplishing organizational purpose. Strategy Formulation is the process of developing the strategy. And the process by which an organization chooses the most appropriate courses of action to achieve its defined goals. This process is essential to an organization’s success, because it provides a framework for the actions that lead to the anticipated results. CORPORATE MISSION,VISION AND CORE VALUES Corporate Mission: A mission statement is an organisation general purpose Questions Addressed by Mission Statements What is the purpose of organization? What is unique about the organization? What are its principal products and markets? What are its values? Where is it hoping to be in five or ten years’ time? Components of a good mission statement A good mission statement should show the firms: (i)      Major customer:  It must indicate who the firm targets its products at. (ii)     Products/services. (iii)    Technology (mode of production) – must show whether technology is of major concern to the organization. iv) It must also show the firm’s major concerns or philosophiesg. Commitment to quality Concern for growth Self concept Concern for public image Concern for employees EXAMPLE: To provide customers with as near perfect protection as is humanly possible at an affordable cost. Benefits of a mission statement The mission statement clearly defines the following: The overall company A key value which managers must adhere to that is it defines the organizational culture. Key goals and objectives, which must be attained. Customers to serve and boundaries of operations. Customers’ needs to be satisfied. Product and service benefits to satisfy customers. Technologies by which needs can be satisfied. Specification on how the company intends to incorporate its stakeholders’ rights and claims into its strategic decision making for maximization of the stakeholders’ wealth. The stakeholders include customers, shareholders, suppliers and employees. Corporate Vision Vision is a short, succinct, and inspiring statement of what the organization intends to become and to achieve at some point in the future, often stated in competitive terms. The key qualities of a good corporate vision: The corporate success depends on the vision articulated by the chief executive or the top management. For a corporate vision to have any impact on the employees of an organization: It should be conveyed in a dramatic and enduring way. It should inspire, usually asking employees for the best, the most or the greatest. It should keep organizational stretch in itself It should be communicated constantly, and It should keep linking the events of today to its stipulations, underscoring the relationship between the two. Core Values These are the few key principles that the organization seeks to uphold as it carries on its business. These guide the organization’s vision. They are considered as being fundamental to the success of the entity’s operations and stimulate relations with outsiderse.g integrity, honesty The meaning of the term ‘Objective.’ An objective is the target that must be reached if the organization is to achieve its goals.  Objectives are the translations of the mission into specific concrete terms against which results can be achieved.  Corporate objectives specify what the organization is meant to accomplish.  Each objective should answer 3 questions: (i)   What is to be accomplished? (ii)  How much is to be accomplished? (iii) When is it to be accomplished? Characteristics of good objectives Many organizations use the ‘SMART’ mnemonic to summarize the characteristics of good objectives. S       =       specific: clear, unambiguous, understandable and challenging.e,h 10% ,50 units M     =       Measurable:  quantity, time, money, verifiable. A      =       Achievable:  challenging, but within the reach of competent and   committed person. R      =       relevant:  relevant to objectives of the organization T      =       Time-framed:  to be completed within an agreed timetable

Multidisciplinary nature of management Though management has developed as a separate discipline but it draws knowledge and concepts from disciplines such as sociology, psychology, economics, statistics, operations research etc. Management integrates ideas and concepts from these disciplines and uses them for improving the efficiency of the organization. The integration of knowledge of various fields is the major contribution of management. So the disciplines concerned with human beings contribute immensely to the management. Specifcly we shall look at management as a science, an art and a profession. Management as a science. Science is a systematic body of knowledge pertaining to a specific field of study that contains general facts which explains a phenomenon. It establishes cause and effect relationship between two or more variables and underlines the principles governing their relationship. These principles are developed through scientific method of observation and verification through testing. Characteristic of science. Universally acceptance principles – Scientific principles represents basic truth about a particular field of enquiry. These principles may be applied in all situations, at all time & at all places. E.g. – law of gravitation which can be applied in all countries irrespective of the time. Management also contains some fundamental principles which can be applied universally like the Principle of Unity of Command i.e. one man, one boss. This principle is applicable to all type of organization – business or non business. Experimentation & Observation – Scientific principles are derived through scientific investigation & researching i.e. they are based on logic. E.g. the principle that earth goes round the sun has been scientifically proved. Management principles are also based on scientific enquiry & observation and not only on the opinion of Henry Fayol. They have been developed through experiments & practical experiences of large no. of managers. E.g. it is observed that fair remuneration to personal helps in creating a satisfied work force. Cause & Effect Relationship – Principles of science lay down cause and effect relationship between various variables. E.g. when metals are heated, they are expanded. The cause is heating & result is expansion. The same is true for management, therefore it also establishes cause and effect relationship. E.g. lack of parity (balance) between authority & responsibility will lead to ineffectiveness. If you know the cause i.e. lack of balance, the effect can be ascertained easily i.e. in effectiveness. Similarly if workers are given bonuses, fair wages they will work hard but when not treated in fair and just manner, reduces productivity of organization. Test of Validity & Predictability – Validity of scientific principles can be tested at any time or any number of times i.e. they stand the test of time. Each time these tests will give same result. Moreover future events can be predicted with reasonable accuracy by using scientific principles. E.g. H2 & O2 will always give H2O. Principles of management can also be tested for validity. E.g. principle of unity of command can be tested by comparing two persons – one having single boss and one having 2 bosses. The performance of 1st person will be better than 2nd. Management as an Art. Art implies application of knowledge & skill to trying about desired results. An art may be defined as personalized application of general theoretical principles for achieving best possible results. Art has the following characters – Practical Knowledge: Every art requires practical knowledge therefore learning of theory is not sufficient. It is very important to know practical application of theoretical principles. E.g. to become a good painter, the person may not only be knowing different colour and brushes but different designs, dimensions, situations etc to use them appropriately. A manager can never be successful just by obtaining degree or diploma in management; he must have also know how to apply various principles in real situations by functioning in capacity of manager. Personal Skill: Although theoretical base may be same for every artist, but each one has his own style and approach towards his job. That is why the level of success and quality of performance differs from one person to another. E.g. there are several qualified painters but M.F. Hussain is recognized for his style. Similarly management as an art is also personalized. Every manager has his own way of managing things based on his knowledge, experience and personality, that is why some managers are known as good managers (like Aditya Birla, Rahul Bajaj) whereas others as bad. Creativity: Every artist has an element of creativity in line. That is why he aims at producing something that has never existed before which requires combination of intelligence & imagination. Management is also creative in nature like any other art. It combines human and non-human resources in useful way so as to achieve desired results. It tries to produce sweet music by combining chords in an efficient manner. Perfection through practice: Practice makes a man perfect. Every artist becomes more and more proficient through constant practice. Similarly managers learn through an art of trial and error initially but application of management principles over the years makes them perfect in the job of managing. Goal-Oriented: Every art is result oriented as it seeks to achieve concrete results. In the same manner, management is also directed towards accomplishment of pre-determined goals. Managers use various resources like men, money, material, machinery & methods to promote growth of an organization. Management as a profession. A profession may be defined as an occupation that requires specialized knowledge and intensive academic preparations to which entry is regulated by a representative body. The essentials of a profession are: Specialized Knowledge – A profession must have a systematic body of knowledge that can be used for development of professionals. Every professional must make deliberate efforts to acquire expertise in the principles and techniques. Similarly a manager must have devotion and involvement to acquire expertise in the science of management. Formal Education & Training – There are no. of institutes and universities to impart education & training for a profession. No one can practice a profession without going through a prescribed course. Many institutes of management have been

EMPLOYEE SEPARATION Methods of employee separation include; Retirement This can be defined as the exit from an organization, position or career path at mid age with an intention of reducing psychological commitment to work. It is an action initiated by the employer or the employee. Types of retirement a) Mandatory retirement – this is a compulsory retirement initiated by the employer after the employee has attained the maximum retirement age fixed by the organization e.g. 60 years. Benefits of mandatory retirement 1) It enables the organization to replace those whose productivity has declined due to advancement in age 2) It enables the organization to acquire young and potential employees 3) It facilitates human resource planning / succession planning 4) It encourages employees to make plans for retirement in advance. Demerits of mandatory retirement 1) It may lead to less commitment to work a few years before retirement. Employees may develop short timer attitude and may ‘retire psychologically’ before official retirement date. This may lower performance and productivity. 2) Loss of experienced employees – this may affect performance during the transition period. 3) It is expensive in terms of cost regarding retirement benefits particularly when so many employees retire at the same time b) Voluntary retirement This is initiated by the employee voluntarily before the attainment of the mandatory retirement age. An employee for example may opt for early retirement on medical grounds. The employer may also induce the employee by payment of early retirement / retrenchment benefits 2. Discharge / Dismissal Dismissal takes place when an employer terminates the employee’s contract with or without notice. Termination of employment contract with notice requires that the employer must give one month’s notice to the employee as per the Kenya employment Act cap 226. The employer may alternatively discharge an employee without notice by paying one month salary in lieu of notice. The practice of employment contract termination may however vary from one organization to the other. In certain organizations employers may be required to give 2 or 3 months notice and the same applies to the employees. Causes of dismissal (summary dismissal.) 1) Persistent unsatisfactory performance 2) Insubordination – being disobedient to the employer 3) Gross misconduct 4) Theft or colluding to defraud or steal the company’s property 5) Drunkardness or being intoxicated at the place of work by drugs or alcohol which may affect performance 6) Deserting work without employer’s knowledge 7) Being convicted in a court of law 8) Gross negligence of duty leading to heavy loss or destruction of company’s property 9) Non observance of health and safety rules leading to loss of life or major break down of the company’s machinery 10) Participating in illegal strikes or other forms of industrial action. Unfair dismissal The employer should dismiss an employee by acting in a reasonable manner at the time of dismissal. Unfair dismissal occurs when:- 1) The employee is not informed on the nature of complaint against him 2) The employee is not given time to explain 3) The employee is not given an opportunity to improve 4) The employee is not allowed to appeal 5) The employee is not warned of the consequences in the shape of dismissal if specified improvement does not take place 6) The employer’s decision to dismiss is not based on sufficient evidence 7) The offence or misbehaviour does not warrant the penalty of dismissal rather it deserves some lesser penalty 8) The employer has not acted in good faith 3. Layoffs / Redundancy / Retrenchment LAY OFFS: Employees may be laid off under the following circumstances: i. Temporary close down e.g. due to major repairs of machinery ii. Plant relocation iii. Poor economic conditions e.g. during economic recession pending economy recovery iv. Shortage of essential raw materials and other resources e.g. energy resources v. Introduction of new technology e.g. capital intensive technology or computers requiring employment of few people. REDUNDANCY: Employees may be declared redundant and laid off if their positions are no longer needed by the organization as a result of ending or intending to end business operations. This may also be due to major restructuring which may see the closure of certain divisions or departments in a bid to reduce operational costs. Redundancy may also be due to other factors as in the case of layoff. Under redundancy employees are paid terminal dues in accordance with statutory requirements RETRENCHMENT: This is a humane way of carrying out redundancy. It does not always result after ending business operations but may be as a result of trying to improve business. Under retrenchment employees are paid enhanced retirement packages and pension or provident funds provided they have attained the minimum years of qualifying service. Retrenchment is also known as downsizing. Causes of retrenchment in modern organizations 1) Poor economic conditions leading to business down turn 2) Poor management and inadequate planning leading to poor business performance 3) Increased competition and declining profits therefore the need to review production and work methods used in order to improve competitiveness by reducing operational costs 4) Business mergers takeovers and divestments 5) Introduction of capital intensive technology e.g. robots or computers 6) Changes in operational structures / business process re-engineering (BPR) designed to enable quick decision making, fast responses and to empower employees 7) Need to hire multi skilled personnel capable of increasing capacity and responding to change e.g. a culture change for customer focused performance

FACTORS CONSIDERED WHEN DESIGNING THE APPRAISAL APPROACH 1. Timing 2. The appraisal criteria 3. Appraisers ability – technique the appraiser will be able to understand 4. Accuracy of the technique 5. Resource availability 6. Appraisers – are they prejudiced? Factors affecting performance appraisal 1. Soft spot syndrome – This is a tendency on the part of the supervisor or HOD to overvalue certain employees. This is frequently the byproduct of a soft spot that the manager has for particular employees e.g. on basis of social relationships 2. Halo effect / stereotyping – This refers to forming an opinion that is favourable or unfavourable in judging the total worth of an individual on the basis of a single clue or inadequate number of clues or on the basis of a few characteristics which may prove to be dangerous e.g. overweight employees are considered lazy, attractive employees as better workers, older employees as behind time and cannot cope. Other stereotyped assumptions include judgment based on gender, religious background, race etc. 3. Generosity/leniency – This involves being lenient to the extent that nearly every employee gets high rating. The leniency problem may be as a result of inexperience in rating or poor supervision on the part of the manager hence the need to cover up through generous rating 4. Central tendency – This is the most common rating error. It occurs when an appraiser clusters all ratings around central measurements usually on average or mid point scale. The objective is to please everyone in the department. This type of rating denies good performers the benefits of deserved merits e.g. promotions while poor performers are denied a chance to improve. 5. Over strictness – Managers should not be too strict to avoid awarding the deserved scores to employees. This error may be due to setting very high performance standards beyond the reach of employees. 6. Recency error/ latest behaviour – This involves basing appraisal / rating on the latest behaviour demonstrated by the employee e.g. some employees may perform poorly during much of the year but as appraisal time approaches they burst into boundless work activity. Once the rating is over they lapse into inactivity. It is unfair to give a poor rating to employees who have performed well during the year but whose output may have declined towards the end of the year 7. Inter-individual standards – Rating based on inter individual standards should be avoided. E.g. Because Mr. X is such a model employee the rater may develop the habit of using him as the standard measure by which to judge others. Employees should be evaluated objectively based on their performance which should be measured against standards/job descriptions. 8. Lack of clearly defined performance standards 9. Lack of training the appraisers Measures to improve performance appraisal systems 1. The appraiser should be well trained on the skills needed for an effective appraisal exercise 2. The management should clarify performance standards to employees 3. The appraiser should identify desired behavior in observable rather than subjective terms i.e. the rater should be as objective as possible 4. The appraiser should be aware of his or her personal bias and work hard to overcome it. 5. The management should try and use more than one rater and compare results to eliminate biasness 6. The appraisal results should be discussed and reviewed by the appraisee and their immediate supervisor. 7. The rater should always conclude performance evaluation with comments on further development recommended in terms of knowledge, skills or change of attitude through further training, development or other exposure.