What do managers do?

One good answer to this question comes from

the late Peter Drucker, whose name that stands out above all others in
the century-long history of management studies.
A native of Vienna, Austria, Mr. Drucker was an intellectual who worked
as a journalist and studied economics. At some point in his studies he
had an epiphany: economists, he realized, were interested in the
behavior of commodities, while I was interested in the behavior of
people. That led him to, in effect, create the modern study of
management.
Mr. Drucker divided the job of the manager into five basic tasks. The
manager, he wrote:
1) Sets objectives. The manager sets goals for the group, and decides
what work needs to be done to meet those goals.
2) Organizes. The manager divides the work into manageable
activities, and selects people to accomplish the tasks that need to be
done.
3) Motivates and communicates. The manager creates a team out
of his people, through decisions on pay, placement, promotion, and
through his communications with the team. Drucker also referred to this
as the integrating function of the manager.
4) Measures. The manager establishes appropriate targets and
yardsticks, and analyzes, appraises and interprets performance.
5) Develops people. With the rise of the knowledge worker, this task
has taken on added importance. In a knowledge economy, people are
the companys most important asset, and it is up to the manager to
develop that asset.
While other management experts may use different words and focus on
different aspects of these responsibilities, Mr. Druckers basic
description of the managers job still holds.

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Functions of Managers
Managers just don't go out and haphazardly perform their responsibilities.
Good managers discover how to master five basic functions: planning,
organizing, staffing, leading, and controlling.

Planning: This step involves mapping out exactly how to achieve a

particular goal. Say, for example, that the organization's goal is to
improve company sales. The manager first needs to decide which
steps are necessary to accomplish that goal. These steps may
include increasing advertising, inventory, and sales staff. These
necessary steps are developed into a plan. When the plan is in
place, the manager can follow it to accomplish the goal of improving
company sales.
Organizing: After a plan is in place, a manager needs to organize
her team and materials according to her plan. Assigning work and
granting authority are two important elements of organizing.
Staffing: After a manager discerns his area's needs, he may decide
to beef up his staffing by recruiting, selecting, training, and
developing employees. A manager in a large organization often
works with the company's human resources department to
accomplish this goal.
Leading: A manager needs to do more than just plan, organize, and
staff her team to achieve a goal. She must also lead. Leading
involves motivating, communicating, guiding, and encouraging. It
requires the manager to coach, assist, and problem solve with
employees.
Controlling: After the other elements are in place, a manager's job
is not finished. He needs to continuously check results against goals
and take any corrective actions necessary to make sure that his
area's plans remain on track.

All managers at all levels of every organization perform these functions,

but the amount of time a manager spends on each one depends on both
the level of management and the specific organization.
Roles performed by managers
A manager wears many hats. Not only is a manager a team leader, but he
or she is also a planner, organizer, cheerleader, coach, problem solver,
and decision maker all rolled into one. And these are just a few of a
manager's roles.
In addition, managers' schedules are usually jam-packed. Whether they're
busy with employee meetings, unexpected problems, or strategy sessions,
managers often find little spare time on their calendars. (And that doesn't
even include responding to e-mail!)

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In his classic book, The Nature of Managerial Work, Henry Mintzberg

describes a set of ten roles that a manager fills. These roles fall into three
categories:
Interpersonal: This role involves human interaction.
Informational: This role involves the sharing and analyzing of
information.
Decisional: This role involves decision making.
Table 1 contains a more in-depth look at each category of roles that help
managers carry out all five functions described in the preceding
Functions of Managers section.
TABLE 1
Category
Informatio
nal

Mintzberg's Set of Ten Roles

Role
Activity
Monitor

Seek and receive information; scan

periodicals and reports; maintain personal
contact with stakeholders.

Disseminator Forward information to organization

members via memos, reports, and phone
calls.

Interperso
nal

Decisional

Spokesperso
n

Transmit information to outsiders via reports,

memos, and speeches.

Figurehead

Perform ceremonial and symbolic duties,

such as greeting visitors and signing legal
documents.

Leader

Direct and motivate subordinates; counsel

and communicate with subordinates.

Liaison

Maintain information links both inside and

outside organization via mail, phone calls,
and meetings.

Entrepreneur Initiate improvement projects; identify new

ideas and delegate idea responsibility to
others.
Disturbance
handler

Take corrective action during disputes or

crises; resolve conflicts among subordinates;
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Category

Role

Activity
adapt to environments.

Resource
allocator

Decide who gets resources; prepare budgets;

set schedules and determine priorities.

Negotiator

Represent department during negotiations of

union contracts, sales, purchases, and
budgets.

Skills needed by managers

Not everyone can be a manager. Certain skills, or abilities to translate
knowledge into action that results in desired performance, are required to
help other employees become more productive. These skills fall under the
following categories:
Technical: This skill requires the ability to use a special proficiency
or expertise to perform particular tasks. Accountants, engineers,
market researchers, and computer scientists, as examples, possess
technical skills. Managers acquire these skills initially through formal
education and then further develop them through training and job
experience. Technical skills are most important at lower levels of
management.
Human: This skill demonstrates the ability to work well in
cooperation with others. Human skills emerge in the workplace as a
spirit of trust, enthusiasm, and genuine involvement in interpersonal
relationships. A manager with good human skills has a high degree
of self-awareness and a capacity to understand or empathize with
the feelings of others. Some managers are naturally born with great
human skills, while others improve their skills through classes or
experience. No matter how human skills are acquired, they're critical
for all managers because of the highly interpersonal nature of
managerial work.
Conceptual: This skill calls for the ability to think analytically.
Analytical skills enable managers to break down problems into
smaller parts, to see the relations among the parts, and to recognize
the implications of any one problem for others. As managers assume
ever-higher responsibilities in organizations, they must deal with
more ambiguous problems that have long-term consequences.
Again, managers may acquire these skills initially through formal
education and then further develop them by training and job
experience. The higher the management level, the more important
conceptual skills become.
Although all three categories contain skills essential for managers, their
relative importance tends to vary by level of managerial responsibility.
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Business and management educators are increasingly interested in

helping people acquire technical, human, and conceptual skills, and
develop specific competencies, or specialized skills, that contribute to
high performance in a management job. Following are some of the skills
and personal characteristics that the American Assembly of Collegiate
Schools of Business (AACSB) is urging business schools to help their
students develop.

Leadership ability to influence others to perform tasks

Self-objectivity ability to evaluate yourself realistically
Analytic thinking ability to interpret and explain patterns in
information
Behavioral flexibility ability to modify personal behavior to
react objectively rather than subjectively to accomplish
organizational goals
Oral communication ability to express ideas clearly in words
Written communication ability to express ideas clearly in
writing
Personal impact ability to create a good impression and instill
confidence
Resistance to stress ability to perform under stressful
conditions
Tolerance for uncertainty ability to perform in ambiguous
situations

When growing your business, your management structure becomes

more important as your company grows. When youre starting out,
and while your company is small, you may be able to fulfill all roles
in the management hierarchy. If you have a scalable, successful
business however, growth is inevitable, and you will need to have
managers at different levels to ensure work is completed in the
most effective and efficient manner possible. This said, it is
important to understand the 3 major types of managers in growing
and/or larger companies.
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Organizations employ three levels of managers: first-line managers,

middle managers, and top managers. They are arranged in a
hierarchy of authority, and each has different, but related,
responsibilities. These three types of
managers are grouped into departments (or functions). A
department is a group of people who work together and possess
similar skills or use the same skill sets to perform their jobs.
1. First-line managers are responsible for the daily supervision of
nonmanagerial employees.
2. Middle managers supervise first-line managers. They also work
with first line managers to identify new ways of reaching
organizational goals. Very often, the suggestions that they make to
top management can dramatically increase organizational
performance.
3. Top managers are responsible for the performance of all
departments and therefore have a cross-departmental responsibility.
Because top management is ultimately responsible for the success
or failure of the organization, persons inside and outside of the
organization closely scrutinize their performance. It is the CEOs
responsibility to build a top management team that performs well.
The term COO (chief operating officer) is often used to refer to the
top manager who is being groomed to take over when the current
CEO leaves the company or retires.

Recall that management is the planning, organizing, leading, and

controlling of human and other resources to achieve organizational
goals effectively and efficiently. The relative importance of each
phaseplanning, organizing, leading and controllingvaries
according to managerial level. Top managers devote most of their
time to planning and organizing. CEOs and COOs, for example, need
to carefully think about and plan a companys strategy because
there is a lot of risk if mistakes are made. Lower level managers
devote more time to leading and controlling.
Planning, organizing, leading, and controlling are all very important
management functions needed to grow a successful business. Part
of all management consulting services is to ensure an organizations
management fulfills all of these functions to be effective. As I
mentioned earlier though, as a company grows, single managers
may find themselves spread out too thinly and will not be able to
perform as well as they used to. Thus, its important to take note
that different types of managers can focus on the different
management functions required to produce great results.

What is an Organization? by Sumitava Mukherjee

An Organization is a system of consciously coordinated activities or
efforts of two or more
persons.- Chester Barnard, Management Consultant.
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This definition of Barnard implies formal planning, division of labor and

leadership.
Organizations can also be thought as social entities that are goal
directed, deliberately structured
activity systems with a permeable boundary according to Bedeian and
Zamnuto.
There are a couple of things to be noted. If a couple of enthusiastic people
plan and decide to
help kids then they form an organization but, if a few people find a kid in
trouble and helps the kid
out (without conscious co-ordination and planning) then they don't form
an organization.
In Bedian and Zamnuto's definition, 'deliberately structured activity
systems' basically means that
the organizations are (on-purpose) structured so that it is possible to
systematically divide
complex tasks among multiple people or units to achieve a common
purpose and 'permeable
boundary' is a conceptual boundary (apart from the physical fencing) thet
defines who/what is a
part of an organization. This is also related to brand management.
Effective Organization matters!
There are a couple of guidelines that people have proposed and seems to
be applied in most
classical organizations(In classical organizations hierarchy of power and
responsibility flow from
top to bottom).
Each person in the organization should report to only one boss.
The responsibility and authority of every supervisor should be expressed
clearly in
writing.
Every person is responsible for the acts of her/his sub-ordinates.
Every person should be assigned a single function (or as less functions
as possible)
based on specialization and skills of the person.
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 The operation functions (line functions) and staff functions should be

kept seperate but
line managers and staffs managers should be encouraged to coordinate to
boost
synergy.
The span of control should be reasonable and feasible. [Span of control
means the
number of positions controlled by one person (mostly a manager).
Before we go ahead in our exploration of OB concepts, let's compare
organizational structures
(Mechanistic and Organic structures) and the comparison between
centralization and
decentralization.
Mechanistic and Organic structures.
Mechanistic is rigid, quite efficient bureaucracy which is reliable, stringent,
logical, where
responsibility is well documented and authority is legitimate.
Organic structures are based more on humanistic models and needs of
personnel which pays
importance to emotional and social needs of people. It also doesn't have
rigid, stringent norms
and authority isn't very clear.
Characteristics of an organization with a mechanistic structure : 1.
Division of labor strictly through functional specialization.
2. Rules that define the duties and rights of personnel should be clear and
well-defined
3. Procedures are pre-laid down to be used in different work situations.
4. Relationships and dealings should be impersonal among people.
5. Selection and promotion is based only on technical competence.
Some people argue that mechanistic forms treat people like workers and
fail to recognize the
importance of psychological needs of people.
Characteristics of Organizations which have an Organic structure:
1. Tasks and roles are less rigidly defined and there is little emphasis on
formal
8 |Page

specializations.
2. Atmosphere is collegial and hence there is more information exchange
and discussion
(instead of orders and directions).
3. Decision making is decentralized and decisions are taken on demand by
people who are
currently involved in the operations at hand (which also assumes that
people at the top
need not be the best person to decide for the problem at hand).
4. Boundaries inside the organization are flexible and horizontal
relationships are
encouraged across teams or departments who are equally important
and/or responsive to
the problem.
Centralization and Decentralization.
Centralization means that the authority for most decisions is concentrated
at the top apex and in
decentralization authority is delegated through all levels of the
organization. As is the case
mostly, neither is it possible to have a purely centralized organization
except a very small
company and it is also not possible to have complete decentralization.

Why Study Management

You may be wondering why you need to study management. If you are
an accounting major, a marketing major, or an major other than
management, you may not understand how studying management may
help you in your career. We can explain the value of studying
management by looking at the universality of the management, the
reality of work, and the rewardsand challenges of being a manager.
The Universality of Management:
Just how universal is the need of management in organizations? We can
say with certainty that management is needed in all types and sizes of
organizations, at all organizational levels and in all organizational work
areas, and in all organizations, no matter what country they are located in.
This is known as the universality of management. Managers in all these
settings will plan, organize, lead, and control. However this is not to say
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that management is done the same way. The differences in what a

supervisor in a software applications testing facility at Microsoft does
versus what the CEO of Microsoft does are a matter of degree and
emphasis, not of function. Because both are managers, both will plan,
organize, lead, and control, but how they do so will differ.
Since management is universally needed in all organizations, we have a
vested interest in improving the way organizations are managed. Why? we
interact with organizations every single day of our lives. Does it frustrate
you when you have to spend three hours in department of motor vehicles
office to get your driver\'s license renewed? Are you irritated when non of
the sales persons in a department store seems interested to help you? Do
you get annoyed when you call an airline three times and their sales
representatives quote you three different prices for the same trip? Theses
are all examples of problems created by poor management. Organizations
that are well managed develop a loyal customer base, grow, and prosper.
Those that are poorly managed find themselves with a declining customer
base and reduced revenues. By studying management, you shall be able
to recognize poor management and work to get it corrected. In addition,
you shall be able to recognize good management and encourage it,
whether it is in an organization with which you are simply interacting or
whether it is in an organization in which you are employed.
The Reality of Work:
Another reason for studying management is the reality that for most of
you, once you graduate from college and being you career, you will either
manage or be managed. For those who plan on management careers, an
understanding of the management process forms the foundation upon
which to build your management skills. For those of you who don\'t see
your self in a management position, you are still likely to have work with
managers. Assuming that you will have to work for a living and
recognizing that you are very likely to work in an organization, you shall
probably have some managerial responsibilities even if you are not a
manager. Our experience tells us that you can gain a great deal of insight
into the way your boss behaves and the internal workings of organizations
by studying management. Our point is that you don\'t have to aspire to be
a manager to gain something valuable from a course in management.
Rewards and Challenges of Being a Manger:
We cannot leave our discussion of the value of studying management
without looking at the rewards and challenges of being a manager. What
does it mean to be a manager? Being a manager in today\'s dynamic work
place provides many challenge. It can be a tough and often thankless job.
You may have to deal with a variety of personalities and many times have
to make do with limited resources. It can be a challenge to motivate works
in the face of uncertainty and chaos. And managers may find it difficult to
effectively blend the knowledge, skills, ambitions, and experience of a
divers group of employees. Finally, as a manager, you are not in full
control of your destiny. Your success typically is dependant upon others,
work performance.

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Despite these challenges, being a manager can be very rewarding. You

are responsible for creating a work environment in which organizational
members can do their work to the best of their ability and help the
organization achieve its goals. In addition, as a manager, you often have
the opportunity to think creatively and use your imagination. You help
gather find meaning and fulfillment in their work. You get to support,
coach, and nurture others and help them make good decisions. You shall
get to meet and work with a variety of people-both inside and outside the
organizations. Other rewards of being a manger may include receiving
recognition and status in the organization and in the community. Playing a
role in influencing organizational out comes, and receiving attractive
compensation in the form of salaries, bonus, and stock options. Finally,
organizations need good managers. Nothing greater ever happens by it
self! its through the combined efforts of motivated and passionate people
that organizations accomplish their goals. As a manager, you can get
satisfaction from knowing that your efforts, skills and abilities are needed.
efinition of 'Diversification'
A risk management technique that mixes a wide variety of investments
within a portfolio. The rationale behind this technique contends that a
portfolio of different kinds of investments will, on average, yield higher
returns and pose a lower risk than any individual investment found within
the portfolio.
Diversification strives to smooth out unsystematic risk events in a
portfolio so that the positive performance of some investments
will neutralize the negative performance of others. Therefore, the benefits
of diversification will hold only if the securities in the portfolio are not

perfectly correlated.
Investopedia explains 'Diversification'
STUDIES AND MATHEMATICAL MODELS HAVE SHOWN THAT MAINTAINING A WELLDIVERSIFIED PORTFOLIO OF 25 TO 30 STOCKS WILL YIELD THE MOST COST EFFECTIVE LEVEL OF RISK REDUCTION . I NVESTING IN MORE SECURITIES WILL STILL
YIELD FURTHER DIVERSIFICATION BENEFITS , ALBEIT AT A DRASTICALLY SMALLER RATE.
FURTHER

DIVERSIFICATION BENEFITS CAN BE GAINED BY INVESTING IN FOREIGN

SECURITIES BECAUSE THEY TEND BE LESS CLOSELY CORRELATED WITH DOMESTIC
INVESTMENTS . F OR EXAMPLE , AN ECONOMIC DOWNTURN IN THE U.S. ECONOMY MAY
NOT AFFECT JAPAN 'S ECONOMY IN THE SAME WAY ; THEREFORE , HAVING JAPANESE
INVESTMENTS WOULD ALLOW AN INVESTOR TO HAVE A SMALL CUSHION OF
PROTECTION AGAINST LOSSES DUE TO AN A MERICAN ECONOMIC DOWNTURN.

MOST

NON -INSTITUTIONAL INVESTORS HAVE A LIMITED INVESTMENT BUDGET,

AND MAY FIND IT DIFFICULT TO CREATE AN ADEQUATELY DIVERSIFIED PORTFOLIO . THIS
FACT ALONE CAN EXPLAIN WHY MUTUAL FUNDS HAVE BEEN INCREASING IN
POPULARITY . B UYING SHARES IN A MUTUAL FUND CAN PROVIDE INVESTORS WITH

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AN INEXPENSIVE SOURCE OF DIVERSIFICATION

Planning in Management
Planning is deciding in advance what to do and how to do.It is one of the
basic managerial functions. Before doing something, the manager must
formulate an idea of how to work on a particular task. Thus, planning is
closely connected with creativity and innovation. It involves setting
objectives and developing appropriate courses of action to achieve these
objectives.
Planning Definition
"Planning bridges the gap from where we are to where we want
to go. It makes it possible for things to occur which would not
otherwise happen" - Koontz and O'Donnel.
Importance of Planning

Planning provides directions

Planning reduces the risks of uncertainty

Planning reduces overlapping and wasteful activities

Planning promotes innovative ideas

Planning facilitates decision making

Planning establishes standards for controlling.

(Read more on the Importance of Planning ...)

Features of planning

Planning focuses on achieving objectives

Planning is a primary function of management

Planning is pervasive

Planning is continuous

Planning is futuristic

Planning involves decision making

Planning is a mental exercise

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Planning Process
Setting objectives: Objectives may be set for the entire organisation
and each department or unit within the organisation.
Developing premises: Planning is concerned with the future which is
uncertain and every planner is using conjucture about what might happen
in future.
Identifying alternative courses of action: Once objectives are set,
assumptions are made. Then the next step would be to act upon them.
Evaluating alternative courses: The next step is to weigh the pros and
cons of each alternative.
Selecting an alternative: This is the real point of decision making. The
best plan has to be adopted and implemented.
Implement the plan: This is concerned with putting the plan into action.
Follow-up action: Monitoring the plans are equally important to ensure
that objectives

Types of Plans
Objectives: Objectives are very basic to the organisation and they are
defined as ends which the management seeks to achieve by its
operations.They serve as a guide for overall business planning.
Strategy: strategy is a comprehensive plan for accomplishing an
organisation objectives. This comprehensive plan will include three
dimensions,
(a) determining long term objectives,
(b) adopting a particular course of action, and
(c) allocating resources necessary to achieve the objective.
Policy: They are guides to managerial action and decisions in the
implementation of strategy.
Procedure: Procedures are routine steps on how to carry out activities.
Procedures are specified steps to be followed in particular circumstances.
Method: Methods provide the prescribed ways or manner in which a task
has to be performed considering the objective. It deals with a task
comprising one step of a procedure and specifies how this step is to be
performed.
Rule: Rules are specific statements that inform what is to be done. They
do not allow for any flexibility or discretion.
Programme: Programmes are detailed statements about a project which
outlines the objectives, policies, procedures, rules, tasks, human and
physical resources required and the budget to implement any course of
action.
Budget: It is a plan which quantifies future facts and figures. It is a
fundamental planning instrument in many organisations.
PROBLEM -SOLVING

AND DECISION -MAKING:

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:Problem-solving and decision-making

:The problem-solving and decision-making process stages are
:Defining the problem - 1
In-depth study of the problem to find out the details and background, and
highlights the collective participation in determining where the problem is
more prominent and mature individual effort, because the ability of the
individual, not being able to take the circumstances of the problem unlike
.collective effort
:Defining the target - 2
Select what you want to achieve and to avoid any mention of what it
.intends to follow in order to reach this goal
:to identify alternatives - 3
This refers to the stage of investigation and inspection, different solutions
to solve the problem that was diagnosed accurately and should bear the
administrative greater number of alternative solutions in order to ensure
.not falling into the error and select a suitable replacement
:Evaluation of alternatives - 4
Must evaluate each alternative solution, taking into account the following
:considerations
The possibility of implementing alternative and the availability of human
.and material resources appropriate for its implementation
The financial costs of implementation and profits expected to be achieved
.and potential losses
Psychological and social implications of its implementation and the
response of subordinates to alternative and timeliness of its
.implementation
There is no doubt that collective participation will help in the evaluation of
.alternatives and enrich the debate
:select the alternative - 5
Here are the appropriate choice of alternatives available and select the
alternative should be considered which leads to optimum utilization of
factors of production material and human resources available with
minimal effort, as well as select the alternative should be included to
achieve the required speed, especially if the solution requires urgency and
speed. There is no doubt that collective participation in the selection of
alternative gives individuals a kind of security as well as the enthusiasm
.to implement the resolution, which was based on their participation
:implementation of the resolution - 6
Here are necessary - after the selection of alternatives - the
implementation of the resolution notes that the stage of implementation
of the resolution require some kind of follow-up and cooperation of others
.and monitor implementation to ensure the integrity of the application

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:Collective participation in decision-making

Give subordinates the opportunity to participate in decision-making,
helping to strengthen the quality of the decision to increase its
effectiveness and to achieve its purpose, as well as increase the
commitment of individuals to implement all its provisions because they
participated in decision-making, which helps to raise morale and increase
.the degree of affiliation
:Benefits of collective participation in decision-making
Verify participation to understand the subordinates of the decision and - 1
.accepted it
participation led to increased commitment by subordinates to the - 2
implementation of the resolution and their enthusiasm for this
.implementation
Verify participation subordinates to accommodate the objectives of - 3
.resolution
allow participation to satisfy the needs of senior personnel mines, - 4
which is in
.Independence and a sense of subjective and achievement
When you are participating through the method considered by - 5
members of the group
Project prior to the convening of meetings to discuss and debate
management style and AVI, the group was exerting pressure on their
.members to accept the resolution and submit to it
enables mass participation to increase opportunities for cooperation - 6
between individuals to solve common
.problems
RELATION

BETWEEN PROBLEM TYPES AND MANAGEMENT DECISION LEVELS

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Problem and decision level

Figure shows relation between different types of problems in companies
and management functions dealing with problems. Structured problems
solve operative level of management, low level. Structured problems are
solved in Transaction Production Systems (TPS)
Mid management deals on tactical level with different types of problems
and mainly with partly structured problems. Two systems are available for
solving structured, partly structured and non structured problems:
Management Information System and Decision Support System.
Top management levels dealing with strategic decisions do not have any
support of information systems. Theoretically, experts systems should
deal with problems on strategic level, but currently there are no expert
systems alive and functioning.
DECISION -MAKING PROCESS

1. Define and clarify the issue - does it warrant action? If so, now? Is
the matter urgent, important or both. See the Pareto Principle.
2. Gather all the facts and understand their causes.
3. Think about or brainstorm possible options and solutions.
(See brainstorming process)
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4. Consider and compare the pros and cons of each option - consult if
necessary - it probably will be.
5. Select the best option - avoid vagueness or 'foot in both camps'
compromise.
6. Explain your decision to those involved and affected, and follow up
to ensure proper and effective implementation.
http://www.slideshare.net/bsetm/chapter-6-decision-making-the-essenceof-the-manager-s-job

the above link is really good.

Innovation and flexibility

ABSTRACT
The features of innovation, flexibility and change mutually influence one
another. Provided that change is
perceived as a feature leading to innovation, flexibility is the feature that
enables it. Innovation cannot exist without
change but nonetheless each and every change leads to innovation.
Flexibility is a necessary condition but not
sufficient for the innovation since it is influenced by change and balanced
by flexibility. This fact suggests that the
flexible companies lead to a more significant innovation comparatively to
those inflexible. The innovations are more
likely to develop when the organizational conditions allow flexibility.
Concerning innovation, two types of
flexibilities have been identified. The first type creates a routine allowing
to companies to take advantage of
opportunities leading to increasing the input capacity. The second type
avoids the existent routine with the aim of
creating new opportunities leading to high innovation.
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The type of innovation requested and that of flexibility are determined by

the stability of the organization
change and its environment.
1. INTRODUCTION
The central role of flexibility is that of enabling the survival and all the
more the success of organizations
on a turbulent environment which is characteristic to the new tendencies
in the entire world. The more flexible the
organization becomes, the more suitable for the change it will be. The
flexible companies enable creativity,
innovations and speed, all these being included within the processes of
their coordinating and organizing. Given the
conditions of rapid change, flexibility is a competitive advantage. An
organization has to cope with both threats and
the inherent opportunities in an insecure future and an unstable
environment. Flexibility and promptness are the
characteristics of the organizational success whereas the necessity of
being flexible is a must of competition.
The concept of flexibility, as an expression of the actual tendency for the
evolution of the manufacturing
processes has not found a definition unanimously accepted by the
specialists. In the opinion of most of them,
flexibility represents the capacity of a system of manufacturing to adapt
to different manufacturing tasks so that it
should ensure an economic functioning the relation time/ cost should be
optimum with insignificant changes of
structure and for a long period of time.
The concept of flexibility within an organization may be better understood
if the relation with other
concepts like change, survival, the management responsibility, the
organizational conditions, innovations,
competitive advantage, risk and profit, strategy, allocation of financial
means and the density of environment is
analyzed.
Flexibility is a means of expressing the competitive advantage in an
unstable environment. The levels and
18 | P a g e

the flexible type requested, both real and perspective are influenced by
the competitors, this meaning that the
organization has to study and analyze the competitors on regular basis.

2. THEORETICAL FUNDAMENTS
The flexible organization registers a competitive advantage also through
the agency of speed and surprise.
Speed refers to the quick evolution of products and services and of the
modality of developing activities
comparatively to those of the competitors. In this way the organization
becomes a leader, the industry being in a
leading position owing to the capacity of rapid and efficient adjustment.
The character of environmental changes as
well as the profile of the competitors influence the time necessary to
flexibility referring process has to be realized on a short, medium and long
term. For these different times, different types of flexibility are suitable.
Surprise
brings a competitive advantage through the fact that the flexible
organization studies the environment on regular
basis, having the capacity of identifying the opportunities such as new
products, markets and technological process,
efficient from the standpoint of cost, before the competitors do. A flexible
organization may influence the
environment through its activities and all the more creating uncertainties
for the rival competitors so that it may
register a competitive advantage.
Thus flexibility is a strategic and important instrument which the
administration may use in order to create
and maintain the competitive advantage.
There is a close connection among strategy, flexibility and change. The
change has to be approached in
such a manner so that the flexibility in the organization should be
maintained with the purpose of adjusting to the
future change. Any decision affecting flexibility should be taken into
consideration within the strategic parameters.
The strategy plays the role of constraint for the flexibility (Ansoff 1988),
that is why the character of
19 | P a g e

flexibility created in an organization is determined by the strategy.

Flexibility may rather be a modality of obtaining strategy comparatively
to the deviated strategic effects or
taking advantage from the strategic increased effects of possible events.
The administration should take into account the impetus of developing a
new strategy upon the actual and
perspective levels of flexibility. The levels of the requested flexibility are
based on the current strategy and on the
analysis of changing environment and uncertainties. \

3. METHODS AND RESULTS

It is very important to state that the flexible organizations lead to a more
significant innovation
comparatively to those inflexible.
Establishing the innovation strategy has a very important role. There are
three innovation strategies:
- the innovation strategy technology-push;
- the innovation strategy market-pull;
- the integrated innovation strategy.
The central differential criterion concerning the first two strategies is the
direction the innovation is
initiated. While in the case of the first strategy, the idea for the new
product or service comes from the company,
usually from the research department, in the case of the market-pull
strategy, the initiative belongs to the clients.
a) The strategy technology-push
The companies whose activity is based on technology-push premise
make efforts in finding adequate
possibilities for applying the technological solutions or of the already
developed innovations.
This strategic vision has the important advantage of developing a high
number of new ideas. However, this
strategy is also connected with a high perspective risk and a high degree
of failures which occur because of the
insufficient orientation on the clients desires.
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The success of a product developed on the basis of technology-push

strategy are even higher as the degree
of innovation and the product utility for the client are high. It is also likely
to appear the situation in which the client
is not aware of its need for a certain product.
b) The strategy market-pull
Within the strategy market-pull the fundamental idea is based on the
premise that the deciding factors for
innovating both products and services derives from the market,
respectively from the clients needs. This hypothesis
considers that the market needs innovation that is the defining elements
for increasing the utility of the products
have already been required by the actual clients.
In the last period, in order to identify the clients desires the so-called
lead-user concept has gained an utmost
importance. It refers to the direct attraction of clients in order to a rapid
and well-defined identification of their
needs. Within the concept lead-user, those clients-users who have already
strongly been involved in the products
matters, they being particularly concerned about it are also highly
motivated in coping with it.
A more diluted form of cooperation may be performed through the
method customer-integration. In this
case it is also aimed at stirring some impulses to develop innovations
through workshops, different meetings with
clients participation or forums of discussions. Within these methods, the
selection of the clients is a more
pessimistic one, without being limited as in the case of lead-user method.
The innovation strategy market-pull offers the possibility of analyzing the
future needs of the clients and all
the more of discovering the new supporting elements in order to develop
the orientation towards clients.
Nevertheless this strategy has the risk of the appearance on the market of
the early followers since the competitors,
too analyze the latent desires of the consumers and in turn develop
strategy in order to satisfy them. c) The integrated strategy of innovation
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The adjustment of the methods technology-push and market-pull have

been long discussed and criticized,
nonetheless research has proved that the companies adopting the marketpull strategy have great successes on a long
term.
More recently then ever they have frequently represented the vision in
conformity with which a rational
decision upon the innovation strategy should be adopted taking into
account the fundamental strategic orientations
of the company and that is the strategy towards the clients, towards the
competitors and the technological strategy.
Consequently one should start with the integrated strategy of innovation,
the so-called Coupling Model of
Innovation which takes into account not only the technological structure
but that of the market, as well, this being
shown by the following figure:

New needs of
the clients
Requirements towards the company, e.g. from the clients,
competitors, society etc.
Figure 1.The integrated model for the innovation management within the
example of the product innovation
Source: Turbulence and Organizational Flexibility, Economic Printing
House,2007:119
4. DISCUSSION
This vision is characterized not only through integrating the market and
technology requirements; it also
refers to integrating the external partners, as for example the suppliers
within a concept of Simultaneous
Engineering. Thus through organizational and technical provisions, they
try to connect the innovative process of the
suppliers with that of the manufacturers aiming at entering the market
before the competitors do.
In this case it is obvious the fact that the innovation may be initiated both
by the company and through the
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impetus of the actual clients, nonetheless an integrating vision upon

products and services is convenient.
5. CONCLUSION
Flexibility is a necessary condition but not sufficient for the innovation
since it is influenced by change and
balanced by flexibility. This fact suggests that the flexible companies lead
to a more significant innovation
comparatively to those inflexible. The innovations are more likely to
develop when the organizational conditions
allow flexibility. Concerning innovation, two types of flexibilities have been
identified. The first type creates a
routine allowing to companies to take advantage of opportunities leading
to increasing the input capacity. The
second type avoids the existent routine with the aim of creating new
opportunities leading to high innovation.
The type of innovation requested and that of flexibility are determined by
the stability of the organization
change and its environment.

WHAT IS 'ORGANIZATIONAL CULTURE '?

THE CULTURE OF AN ORGANIZATION

In the past 50 years, organizational culture (or the understanding of
it) has become extremely important to many businesses. Many have
used it to increase the efficiency of their operation, train leaders, or
change the direction of their organization.
Organizational culture is culture in general on a smaller scale, usually
referring to a business, group, association, or organization. It is the
basic values and beliefs of the people in the group. It also extends to
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the behavior and the symbols of the organization.

The basic values may be conscious or unconscious and may or may
not be obvious to newcomers to the organization. These values could
be such things as loyalty to the company, or self promotion. They
could be strict conformance to rules and regulations or an
encouragement of innovation.
It is necessary to understand the culture of a unit if you wish to
change the direction of the company or organization. For example, a
strong culture in the group is not always a good thing. It can
discourage interaction between people and encourage strict
adherence to the rules, loosing sight of the main purpose of the
organization.
A STRONG ORGANIZATIONAL CULTURE
An organizational culture can be weak or strong. Both have advantages
and disadvantages.
A strong organizational culture could be one were the majority of the the
participants hold the same basic beliefs and values as applies to the
organization. The people in this group may follow the perceived rules and
ethical procedures that are basic to the organization, even if those values
are not publicly stated by the organization.
This can be extremely valuable for building a team where all the
participants have the same goals. Working together to improve efficiency
or, possibly, communication with management could be some of the
goals.
This could also be detrimental to the company if the rules and regulations
become more important to the participants than the actual goals of the
company. New people joining the company are consciously of
unconsciously indoctrinated into the existing culture, making innovation
hard to come by.

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A Weak Organizational Culture

A WEAK ORGANIZATIONAL CULTURE

A weak organizational culture could be one that is loosely knit. It
may encourage individual thought and contributions and in a
company that needs to grow through innovation, it could be a
valuable asset.
If the participants in this group, at least have the same goal (e.g. to
help the company grow) then this can make for a vibrant, forward
thinking work force that assists management in forming plans for the
future.
If the people in this group are too individual, it can lead to conflict
between the participants or the participants and management. In this
scenario the culture of the individual participant has taken over and
only their way is the correct way, so there is not any meaningful
communication between the participants and the company cannot
grow, even though it has plenty of innovation.
A happy medium seems to be necessary to maintain a viable,
progressive company. One that has some structured organizational
culture, as in the strong culture, with enough lea way and
encouragement for the individual thinker/innovator to thrive.

Types of Organizational Culture

Organisational culture can vary in a number of ways. It is these variances
that
differentiate one organisation from the others. Some of the bases of the
differentiation are
presented below :
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1. Strong vs weak culture : Organisational culture can be labelled as

strong or weak
based on sharedness of the core values among organisational members
and the degree
of commitment the members have to these core values. The higher the
sharedness and
commitment, the stronger the culture increases the possibility of
behaviour
consistency amongst its members, while a weak culture opens avenues
for each one
of the members showing concerns unique to themselves.
2. Soft vs hard culture : Soft work culture can emerge in an organisation
where the
organisation pursues multiple and conflicting goals. In a soft culture the
employees
choose to pursue a few objectives which serve personal or sectional
interests. A
typical example of soft culture can be found in a number of public sector
organisations in India where the management feels constrained to take
action against
employees to maintain high productivity. The culture is welfare oriented;
people are
held accountable for their mistakes but are not rewarded for good
performance.
Consequently, the employees consider work to be less important than
personal and
social obligations. Sinha (1990) has presented a case study of a public
sector fertilizer
company which was established in an industrially backward rural area to
promote
employment generation and industrial activity. Under pressure from local
communities and the government, the company succumbed to
overstaffing,
converting mechanised operations into manual operations, payment of
overtime, and
poor discipline. This resulted in huge financial losses (up to 60 percent of
the capital)
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to the company.
Formal vs informal culture : The work culture of an organisation, to a
large
extent, is influenced by the formal components of organisational culture.
Roles,
responsibilities, accountability, rules and regulations are components of
formal
culture. They set the expectations that the organisation has from every
member and indicates the consequences if these expectations are not
fulfilled. Table 1.1 presents
some of the components of formal culture and their implication for
organisations.
4.

Informal culture on the other hand has tangible and intangible, specific
and non
specific manifestations of shared values, beliefs, and assumptions. This
part of Organisational culture comprising of artifacts, symbols,
ceremonies, rites, and stories is highlighted in almost all the definitions of
organisational culture.

Six Thinking Hats is a simple, effective parallel thinking process that

helps people be more productive, focused, and mindfully involved. And
once learned, the tools can be applied immediately!
You and your team members can learn how to separate thinking into six
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clear functions and roles. Each thinking role is identified with a colored
symbolic "thinking hat." By mentally wearing and switching "hats," you
can easily focus or redirect thoughts, the conversation, or the meeting.

The White Hat calls for information known or

needed. "The facts, just the facts."

The Yellow Hat symbolizes brightness and

optimism. Under this hat you explore the
positives and probe for value and benefit.

The Black Hat is judgment - the devil's advocate

or why something may not work. Spot the
difficulties and dangers; where things might go
wrong. Probably the most powerful and useful of
the Hats but a problem if overused.

The Red Hat signifies feelings, hunches and

intuition. When using this hat you can express
emotions and feelings and share fears, likes,
dislikes, loves, and hates.

The Green Hat focuses on creativity; the

possibilities, alternatives, and new ideas. It's an
opportunity to express new concepts and new
perceptions.

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The Blue Hat is used to manage the thinking

process. It's the control mechanism that ensures
the Six Thinking Hats guidelines are observed.
Return to top

As you know, the difference between mediocre

and highly effective teams lies not so much in
their collective mental equipment, but in how
well they use their abilities to think and how well
they work together.

Click here for Six

Thinking Hats
Presentation
(Requires Internet
Explorer)

Six Thinking Hats helps actualize the full

thinking potential of teams. And when used as a
meeting management tool, the Six Hats method
provides the disciplined process for individuals
to be focused and to the point.
But possibly most important, it requires each
individual to look at all sides of an issue.
Employees like the way the Six Hats
method neutralizes employee rank in a
meeting where several levels of employees are
present. It also puts people who are quiet and
reserved on an equal playing field with those
who are more talkative and might monopolize a
meeting.

Pertinent Applications for the Parallel Thinking Process of Six

Thinking Hats

Creativity Training, Meeting Facilitation and Meeting Management

Team Productivity and Communication

Product and Process Improvement, and Project Management

Critical and Analytical Thinking, Problem-Solving, and DecisionMaking

29 | P a g e

Wherever High Performance Thinking is needed

S IX T HINKING H ATS A S

M EETING M ANAGEMENT T OOL

According to a recent USA TODAY Snapshots pole 49% of the responders

reported that Unfocused Meetings is what makes them feel unproductive
at work. Utilize Six Thinking Hats as a meeting management tool and
eliminate unfocused and unproductive meetings from your schedule.

Pre-Seminar Reading On The Six Thinking Hats.

We encourage you to read this article prior to attending the Six Thinking
Hats seminar. This article is also available in booklet format and can be
purchased to help you communicate the value of the Six Hats method to
others.

Contact us if you need additional copies.

U SING S IX T HINKING H ATS ,

YOU AND YOUR TEAM WILL LEARN HOW TO :

look at problems, decisions, and opportunities systematically

use Parallel Thinking as a group or team to generate more, better

ideas and solutions

make meetings much shorter and more productive

reduce conflict among team members or meeting participants

stimulate innovation by generating more and better ideas quickly

create dynamic, results oriented meetings that make people want

to participate

go beyond the obvious to discover effective alternate solutions

spot opportunities where others see only problems

30 | P a g e

think clearly and objectively

view problems from new and unusual angles

make thorough evaluations

see all sides of a situation

keep egos and "turf protection" in check

achieve significant and meaningful results

The strategic management process means defining the organizations

strategy. It is also defined as the process by which managers make a
choice of a set of strategies for the organization that will enable it to
achieve better performance. Strategic management is a continuous
process that appraises the business and industries in which the
organization is involved; appraises its competitors; and fixes goals to meet
all the present and future competitors and then reassesses each strategy.
Strategic management process has following four steps:

1. Environmental Scanning- Environmental scanning refers to a process of collecting, s

and providing information for strategic purposes. It helps in analyzing the internal a
factors influencing an organization. After executing the environmental analysis proc
management should evaluate it on a continuous basis and strive to improve it.

2. Strategy Formulation- Strategy formulation is the process of deciding best course of

accomplishing organizational objectives and hence achieving organizational purpose
conducting environment scanning, managers formulate corporate, business and fun
strategies.

3. Strategy Implementation- Strategy implementation implies making the strategy wor

intended or putting the organizations chosen strategy into action. Strategy implem
includes designing the organizations structure, distributing resources, developing d
making process, and managing human resources.

4. Strategy Evaluation- Strategy evaluation is the final step of strategy management p

key strategy evaluation activities are: appraising internal and external factors that a
present strategies, measuring performance, and taking remedial / corrective actions
makes sure that the organizational strategy as well as its implementation meets th
organizational objectives.
These components are steps that are carried, in chronological order, when
creating a new strategic management plan. Present businesses that have
already created a strategic management plan will revert to these steps as
per the situations requirement, so as to make essential changes.

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ENVIRONMENTAL SCANNING - INTERNAL & E XTERNAL ANALYSIS

OF

ENVIRONMENT

Organizational environment consists of both external and internal factors. Environment

scanned so as to determine development and forecasts of factors that will influence org
success. Environmental scanning refers to possession and utilization of inform
occasions, patterns, trends, and relationships within an organizations intern
external environment. It helps the managers to decide the future path of the organiz
Scanning must identify the threats and opportunities existing in the environment. While
formulation, an organization must take advantage of the opportunities and minimize th
threat for one organization may be an opportunity for another.

Internal analysis of the environment is the first step of environment scanning. Org
should observe the internal organizational environment. This includes employee interac
other employees, employee interaction with management, manager interaction with ot
managers, and management interaction with shareholders, access to natural resources
awareness, organizational structure, main staff, operational potential, etc.

Also, discussions, interviews, and surveys can be used to assess the internal environme
of internal environment helps in identifying strengths and weaknesses of an organizatio
As business becomes more competitive, and there are rapid changes in
the external environment, information from external environment adds
crucial elements to the effectiveness of long-term plans. As environment
is dynamic, it becomes essential to identify competitors moves and
actions. Organizations have also to update the core competencies and
internal environment as per external environment. Environmental factors
are infinite, hence, organization should be agile and vigile to accept and
adjust to the environmental changes. For instance - Monitoring might
indicate that an original forecast of the prices of the raw materials that are
involved in the product are no more credible, which could imply the
requirement for more focused scanning, forecasting and analysis to create
a more trustworthy prediction about the input costs. In a similar manner,
there can be changes in factors such as competitors activities,
technology, market tastes and preferences.
While in external analysis, three correlated environment should be
studied and analyzed

immediate / industry environment

national environment

broader socio-economic environment / macro-environment

Examining the industry environment needs an appraisal of the

competitive structure of the organizations industry, including the
competitive position of a particular organization and its main rivals. Also,
32 | P a g e

an assessment of the nature, stage, dynamics and history of the industry

is essential. It also implies evaluating the effect of globalization on
competition within the industry. Analyzing the national
environment needs an appraisal of whether the national framework
helps in achieving competitive advantage in the globalized environment.
Analysis of macro-environment includes exploring macro-economic,
social, government, legal, technological and international factors that may
influence the environment. The analysis of organizations external
environment reveals opportunities and threats for an organization.
Strategic managers must not only recognize the present state of the
environment and their industry but also be able to predict its future
positions.
STEPS

IN

STRATEGY FORMULATION PROCESS

Strategy formulation refers to the process of choosing the most appropriate course of a
realization of organizational goals and objectives and thereby achieving the organizatio
vision. The process of strategy formulation basically involves six main steps. T
steps do not follow a rigid chronological order, however they are very rational and can
followed in this order.

1. Setting Organizations objectives - The key component of any strategy state

the long-term objectives of the organization. It is known that strategy is generally
for realization of organizational objectives. Objectives stress the state of being th
Strategy stresses upon the process of reaching there. Strategy includes both the
objectives as well the medium to be used to realize those objectives. Thus, strate
term which believes in the manner of deployment of resources so as to achieve t
While fixing the organizational objectives, it is essential that the
factors which influence the selection of objectives must be analyzed
before the selection of objectives. Once the objectives and the
factors influencing strategic decisions have been determined, it is
easy to take strategic decisions.
2. Evaluating the Organizational Environment - The next step is
to evaluate the general economic and industrial environment in
which the organization operates. This includes a review of the
organizations competitive position. It is essential to conduct a
qualitative and quantitative review of an organizations existing
product line. The purpose of such a review is to make sure that the
factors important for competitive success in the market can be
discovered so that the management can identify their own strengths
and weaknesses as well as their competitors strengths and
weaknesses.
After identifying its strengths and weaknesses, an organization must
keep a track of competitors moves and actions so as to discover
probable opportunities of threats to its market or supply sources.

33 | P a g e

3. Setting Quantitative Targets - In this step, an organization must

practically fix the quantitative target values for some of the
organizational objectives. The idea behind this is to compare with
long term customers, so as to evaluate the contribution that might
be made by various product zones or operating departments.
4. Aiming in context with the divisional plans - In this step, the
contributions made by each department or division or product
category within the organization is identified and accordingly
strategic planning is done for each sub-unit. This requires a careful
analysis of macroeconomic trends.
5. Performance Analysis - Performance analysis includes discovering
and analyzing the gap between the planned or desired performance.
A critical evaluation of the organizations past performance, present
condition and the desired future conditions must be done by the
organization. This critical evaluation identifies the degree of gap
that persists between the actual reality and the long-term
aspirations of the organization. An attempt is made by the
organization to estimate its probable future condition if the current
trends persist.
6. Choice of Strategy - This is the ultimate step in Strategy
Formulation. The best course of action is actually chosen after
considering organizational goals, organizational strengths,
7. potential and limitations as well as the external opportunities.

Human Resource Management (HRM) is the function within an

organization that focuses on recruitment of, management of, and
providing direction for the people who work in the organization. Human
Resource Management can also be performed by line managers.
Human Resource Management is the organizational function that deals
with issues related to people such as compensation, hiring, performance
management, organization development, safety, wellness, benefits,
employee motivation, communication, administration, and training.
Human Resource Management is also a strategic and comprehensive
approach to managing people and the workplace culture and
environment. Effective HRM enables employees to contribute effectively
and productively to the overall company direction and the
accomplishment of the organization's goals and objectives.

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Human Resource Management is moving away from traditional personnel,

administration, and transactional roles, which are increasingly outsourced.
HRM is now expected to add value to the strategic utilization of
employees and that employee programs impact the business in
measurable ways. The new role of HRM involves strategic
direction and HRM metrics and measurements to demonstrate value.

Portofolio mix
Options in Your Market
For each product, we explored four distinctive marketing strategies:
1. Penetrate your current market to reach more customers (with your
current product).
2. Extend your marketing to reach customers in new markets (with your
current product).
3. Develop a new product for your current customers (to replace the
current product).
4. Diversify the products you offer in ways that complement your current
product.
Small companies tend follow one strategy for each product at a time and,
as Bill rightly pointed out, it takes 18 months to properly test the market
response to a strategy change. So we discussed the strategy for the
product A.
Gary is the technical design member on the team so he liked the third
approach - selling new products and services to the current clients.
Bill has more sales skills and favoured the first approach (selling the
existing products and services to new clients who are similar to the
current clientle) together with the second approach (reaching clients in
new areas of the market).
Options with Your Products
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For each product, the team considered, discussed, argued and finally
agreed what they wanted to do. Next we folded the 'product strategies'
into a 'company strategy' by working out how the marketing of each
product would impact the marketing of the others.
This resulted in a decision to treat products A and D as a pair and to find
complementary products for the B and C products - aiming to have seven
products in their portfolio by next year.
Building the strategy into the business plans
With this company strategy, Tim then amended the Business Plan to
reflect the decisions taken while Bill and Gary amended their respective
Marketing and Production Plans.
How their clients respond to the new marketing push will be interesting
and Tim, Gary and Bill will need to amend their plans as they see what
happens. My hope is that developing their marketing portfolio like this,
they will have more control of where their company is going and what
their clients buy from them.
PRODUCT
B OX )

P O RT FO L I O

THE

B O S T O N M AT R I X ( O R B O S T O N

Introduction
The business portfolio is the collection of businesses and products that
make up the company. The best business portfolio is one that fits the
company's strengths and helps exploit the most attractive opportunities.
The company must:
(1) Analyse its current business portfolio and decide which businesses
should receive more or less investment, and
(2) Develop growth strategies for adding new products and businesses to
the portfolio, whilst at the same time deciding when products and
businesses should no longer be retained.
Methods of Portfolio Planning
The two best-known portfolio planning methods are from the Boston
Consulting Group (the subject of this revision note) and by General
Electric/Shell. In each method, the first step is to identify the various
Strategic Business Units ("SBU's") in a company portfolio. An SBU is a unit
of the company that has a separate mission and objectives and that can
36 | P a g e

be planned independently from the other businesses. An SBU can be a

company division, a product line or even individual brands - it all depends
on how the company is organised.
The Boston Consulting Group Box ("BCG Box")

Using the BCG Box (an example is illustrated above) a company classifies
all its SBU's according to two dimensions:
On the horizontal axis: relative market share - this serves as a
measure of SBU strength in the market
On the vertical axis: market growth rate - this provides a measure of
market attractiveness
By dividing the matrix into four areas, four types of SBU can be
distinguished:
Stars - Stars are high growth businesses or products competing in
markets where they are relatively strong compared with the competition.
Often they need heavy investment to sustain their growth. Eventually
their growth will slow and, assuming they maintain their relative market
share, will become cash cows.
Cash Cows - Cash cows are low-growth
relatively high market share. These are
with relatively little need for investment.
continued profit - so that they continue to
that the company needs for its Stars.

businesses or products with a

mature, successful businesses
They need to be managed for
generate the strong cash flows

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Question marks - Question marks are businesses or products with low

market share but which operate in higher growth markets. This suggests
that they have potential, but may require substantial investment in order
to grow market share at the expense of more powerful competitors.
Management have to think hard about "question marks" - which ones
should they invest in? Which ones should they allow to fail or shrink?
Dogs - Unsurprisingly, the term "dogs" refers to businesses or products
that have low relative share in unattractive, low-growth markets. Dogs
may generate enough cash to break-even, but they are rarely, if ever,
worth investing in.
Using the BCG Box to determine strategy
Once a company has classified its SBU's, it must decide what to do with
them. In the diagram above, the company has one large cash cow (the
size of the circle is proportional to the SBU's sales), a large dog and two,
smaller stars and question marks.
Conventional strategic thinking suggests there are four possible strategies
for each SBU:
(1) Build Share: here the company can invest to increase market share
(for example turning a "question mark" into a star)
(2) Hold: here the company invests just enough to keep the SBU in its
present position
(3) Harvest: here the company reduces the amount of investment in
order to maximise the short-term cash flows and profits from the SBU.
This may have the effect of turning Stars into Cash Cows.
(4) Divest: the company can divest the SBU by phasing it out or selling it
- in order to use the resources elsewhere (e.g. investing in the more
promising "question marks").

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