Posts Tagged ‘Analysis of business’
Procedures play an important role in an organization’s daily operations. They relieve the manager of much of the details in directing the subordinates. They indicate the steps to be taken as well as the required time and order of performing certain things or actions.
They help in facilitating the training of new employees. An orderly statement of ‘what to do’ and ‘how to do’ can save the new employee the expense and frustration of a trial and error method of finding an acceptable way of performing a task. As they are well thought out steps in carrying out the task, work operation is facilitated and better results at lower cost are ensured.
Since procedures dictate a chronological sequence of doing a task and set the time limit for its performance, effective control over each operation is possible.
Organization implies not only a purpose or a set of purposes but a form appropriate to carry on the activities to achieve the objectives. The greater the range of activities of an organization, the more complicated, and specialized does its structure become. It is the organization which carries on the activities of life by means of parts or organs more or less separate in function but mutually dependent. As the business enterprise grows, the separation and definition of functions increase but the oneness of the whole is nonetheless important.
Organization forms the backbone of the management because without its proper care at higher, middle and lower levels of administration, it may be practically difficult and or impossible for any management to run smoothly. Organization is not an end in itself, but a means to the end of business performance and business results. A sound organization contributes greatly to the continuity and success of the enterprise.
An organization tries to establish an effective behavioral relationship among selected employees and in selected work places in order that a group may work together effectively. There are three kinds of work which must be performed whenever an organization comes into being, division of labor, combination of labor and co-ordination, the people and the relationship between them. These are known as fundamentals in every successful organization.
Division of labor
Since an organization of human associations for the achievement of common goals, it involves individuals and groups of individuals. When two or more individuals join together to perform certain tasks, it follows that some division of work is done. Properly or improperly, fairly or unfairly, work is divided among those who participate in a productive organization. With effective planning and organization in an enterprise, the division of labor leads to a fixing of responsibility, the delegation of authority, specialization, and other conceptual schemes which are frequently called the principles of an organization.
No business firm is completely static, like a building or a machine with stationery framework and standard parts that may be replaced from the ready stock or got from outside. Instead shift in demand, in competition, and in other external forces call to continuous adaption, and the ambition and drives of executives within the company keep it evolving. And as changes are made in one part of the company, compensating adjustments are needed in other parts. Consequently, each company should be thought of as a dynamic, integrated entity. Each of these business entities develops character and an individual personality of its own. This personality is shaped, not only by physical resources and technology, or financial inputs but also by some basic objectives which may be set for it by the top management. Objectives are the ends towards which enterprise activities are aimed the end points of planning.
The management at different levels should take measures to make the business plan effective due to the possibility of limitations. These measures include:
i) Establishment of co-ordination between long-terms plans and short-term plans
ii) Bringing co-ordination among all the departments in the organization in formulating and implementing plans.
iii) Formulating a comprehensive plan linking all the departmental plans with the corporate level plans.
iv) Giving proper attention to the departmental level plants.
v) Ensuring the commitment and involvement of all managers at all levels in the organization.
vi) Train and develop the managers in analyzing and understanding external environment, formulate the plans effectively.
vii) Foresee the environmental changes; feed the information forward to all the levels in the organization.
viii) Ensuring effective team work and empower the mangers to formulate effective plans.
Though the top management formulates the business plans, sometimes they fall in producing results due to the uncertainties in the implementation stage.
The limitations of the business planning include:
i) Implementation of the strategic plan should be pre-planned and based on detailed action. Many times managements fail to monitor the implementation process.
ii) Some managers are reluctant to formulate objectives for their departments or jobs.
iii) Managers are sometimes afraid of failure, to achieve business plans.
iv) Managers fail to integrate the plans of their departments or jobs with the organizational/company plans.
v) Some managers do not have required skills to understand and analyze the external environment
vi) Forecasting often becomes misleading due to wrong premises.
vii) Mangers due to their deficient and inherent nature, fail to plan efficiently.
viii) The uncertainties in the environment, makes the business plan in efficient.
ix) Inter-group conflicts: Inter group conflicts and inter-departmental conflicts are the other important limitations of business plan. These limitations are also due to
. Lack of understanding about the objectives of the firm
. Lack of constructive approach to objectives
. Different values and personalities of individual managers
. Competition for scarce resources.
. Built-in conflict between a young manager and an experienced manager.
There is a gap between the objectives those are sought and those realizable to be analyzed with a view to bridging it. Bridging the gap is essential in order to achieve the pre-determined objectives. The following are the measures to analyze and bridge the gap.
. Identifying the products and markets which fit into the existing technologies and production processes and thus developing them at a faster rate. Also, development of products which are already planned.
. Increase the sales volume: Increase the volume of sales by introducing new features to the existing products, developing new users to the existing products, finding new customers and markets, changing the price, improvements in distribution, sales promotion, expansion of production capacities, etc.,
. Increase profit on sales: Increase in profit on sales is possible through increasing the selling price, reduction in cost of production per unit, marketing cost per unit, reduction in inventory increase in productivity etc.,
. Minimize assets through better turnover of inventory: Identify excess inventory in all items and reduce it to the extent possible. Inventory of new material can be reduced to the extent of closer to production or just in time level.
. Value analysis: Value analysis involves a consideration of cost reduction without reduction in the value of the product to the customer. Use of low cost raw material, change in design, and more productive equipment are the ways of doing it.
. Reducing the Fat: This involves reduction of unnecessary, available and controllable costs. These are labor costs, general wastage, non-performing assets, etc.
Deciding the planning period: After formulating planning premises and long term goals, the manager have to decide the length of business plan period. The plan of the period should be based on the nature of the business, the vision and mission of the company. Other factors which influence the planning period are lead time in the development of a new idea business/product, time required to get back the original investment and length of commitments already made.
Finding alternative courses of action: after formulating the business plans, the top level management should find out the alternative courses of actions available in order to accomplish the company’s mission. For example, availability of alternative technologies, alternative sources of capital, highly skilled employees abroad etc.
The premises which can be quantifiable are called tangible premises. The tangible premises include population growth, product demand, past sales, capital invested and the like. The intangible premises are those which cannot be measured quantitatively. These premises include political factors, social factors, technological factors, natural factors, etc. Some factors are controllable and some are uncontrollable. Business plans are to be modified and sometimes reformulated due to the presence of and interaction of uncontrollable premises. Uncontrollable premises include strikes, lockouts, wars natural calamities, emergency situations etc. Controllable premises include company’s labor policy, investment policy, advertising policy, level of technology competency of managerial personnel, quality of human resources, availability of financial resources etc.
Internal Premises include sales forecasts, policies and programs of the organization, capital investment, managerial competency, human resource skills, and other organizational resources. External premises include general business and economic environment, technological changes, government policies and regulations, population growth, political stability, and social factors. Management would identify the objectives to be achieved or where should we go? Where are we? The gap between these two as gap analysis. Many companies have used gap analysis by setting the objectives and identifying the gap between them and the prospective growth of the present. The firms should achieve high performance in orders to fill the gap.