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LEGAL ASPECT: THE COMMON LAW DUTIES OF AN EMPLOYEE

THE COMMON LAW DUTIES OF AN EMPLOYEE
INTRODUCTION

The duties of an employee are governed by the terms of his contract. In the absence of any express or implied terms, his duties will be determined under common law. Contravention of these duties may give an employer the right to dismiss the employee.
Implied duties
The following are circumstances in which the courts have held employees to have implied duties towards their employers.

a) Indemnity. Where the employer suffers some loss because of his liability for the wrongful act of his employee, the employee may be liable to indemnify (compensate) his employer.
b) Misconduct .the employee must not misconduct himself. The term misconduct includes insolence, persistent laziness, immorality, dishonesty and drunkenness.
c) Personal service. The employee must not allow others outside the scope of his employer’s control to perform his tasks.
d) Loyalty and good faith. The employee must not accept bribes or make secret profits
e) Interests of the employer. The employer must do nothing to harm his employer’s interest ,even in his spare time.
f) Careful service. An employee must exercise due care and skill in the performance of his duties. where he claims that ability to do the work undertaken, besides having the ability, he must also perform the tasks diligently and efficiently.
g) Account for property and gain . an employee must account for any money or property belonging to his employer and any gains made thereon.
h) Trade secrecy. The employee must maintain secrecy over his employer’s affairs during the time of his employment. If the employer wishes to extend this beyond the period of employment it would be advisable to insert a suitable clause in the contract of employment.
i) Invention.it is the duty of the employee to disclose all inventions made using the facilities of the employer.
j) Obedience. The employee must obey all lawful and justifiable orders given by his employer in the in his contract of employment . in some circumstances an employee will be justified in refusing a task, even though it is in the contract of employment. The duty of obedience is mitigated where the employee does not show a willful flouting of the essential conditions of the contract.
k) Notice. The employee must give proper notice of termination of his services according to the terms of his contract, the custom of the trade or statute(Employment Act 2007)

DUTIES OF AN EMPLOYER

Employer’s duties are implied under common law and expressed in statutes. In addition, an employer’s duties to persons other than employees is concerned, e.g. Visitors and third parties who suffer loss due to the acts of the employees.

COMMON LAW DUTIES

Work. The employer is not obliged to provide work for his employees except in the following circumstances:
 Where employer is essential to provide a reputation for future employment. This was originally considered to be in the case of actors.
 Where remuneration depends on the amount of work, eg sales commission, the employer will be obliged to provide the work to enable commission to be earned.
Pay. The employer’s common law duties with regard to pay state that the employer must pay the agreed remuneration or what is reasonable in the circumstance.
There is an entitlement to pay even though employees cannot because no work is available . time workers are paid for being ready to work for their agreed hours
Piece workers are also paid for being ready , willing and able. It is up to the employer to find them work.
indemnity. an employer must indemnify his employee where the employee has incurred a liability whilst acting on the employe’s behalf, except where:
a) The employee knew that he was doing an unlawful act.
b) The employee knew that the employer had no right to give the order in questions.
Equipment and premises (safety). The employer must take reasonable care to make his premises safe. examples of unsafe premises include structural defects, bad ventilation, unsafe insulation, slippery floors or staircase etc.
a) He fails to supply suitable equipment and the employee is forced to improvise.
b) He provides defective equipment knowingly, or which he should have known on a reasonable examination. The onus is on the employer to inspect equipment.
c) He fails to remedy defects which have been brought to his notice.
d) But ‘reasonableness is all that is required.
disciplinary and grievance procedure
the employment provides that details of disciplinary and any grievance procedure be notified to employees and any failure to observe such a procedure would result in a breach of contract.

REASONABLE SAFETY

The employer must take reasonable care not to subject his employees to unnecessary risk.
The requirement of safety on one hand production on the other must sometimes conflict.
a) Inherent risk. All work carries some risk and an employer would not be liable for events outside his control provided he had not been negligent.
b) Reasonably foreseeable. If the danger could be reduced or eliminated the question is whether or not the employer was negligent in failing to do so.
c) Obviousness of risk. The more obvious the danger the more likely the law is to impose liability on the employer for failing to prevent the accident.
d) Seriousness of risk. This depends partly on the probability of an accident occurring but party also on the gravity of the results if it does occur.
e) Cost. The magnitude of the risk has be weighed against other factors, particularly against the expense involved in safety measures and the necessity of carrying out the work in hand.

A REASONABLE SAFE SYSTEM OF WORK

There is the requirement for an employer to provide a ‘reasonably safe system of work’ under common law duty, and also the occupational safety and health of 2007 system consist of:
 Reasonably safe work- fellows. If an employer knows or ought to know (perhaps because of complaints) that employees are a danger to others he is obliged to remove the danger.
 Training of employees. Employees must be instructed in the choice of proper equipment and the correct method of working.
 Effective arrangement with regard to safety apparatus
− Arrangements must be made for the provision and use of safety apparatus which will reduce the danger to the absolute minimum.
− No employee, even though experienced, must be left to look after his own safety.
− Safety apparatus must be available at the place it is required.
− It is not necessary to stand over experienced workers instructed in safety systems to ensure they are used.
 Proper co – ordination. When safety depends on co – ordination of the work of a number of departments the employer must ensure that such co – ordination exist.
 Suitable working conditions. Suitable working conditions must be provided. General conditions under which work is carried on must, so far as reasonable care can ensure, be such as are consistent with safety.
 Sufficient men for the task. It is the employer’s duty to ensure that there are sufficient employees to perform a task.

Assignment Strategic Managent

1. ABC company ltd actively started its business operations 5 years ago For the first 3 years of its operations, the company performed progressively well in the areas of profit, general growth and cost management. However, the last 2 years have been characterized with wanting performance .Profit has been dwindling, operational, transaction and administrative costs have been systematically rising. Further there have been complaints by customers on the issues of product quality and customer service. there is general customer dissatisfaction leading to low retention levels.

    

    You have been hired as a consultant to advice management on the way forward.

Required:

Explain possible ways the company can pursue to enable the organization achieve its:

a) cost leadership goals (10 marks)

b) Differential goals (10 marks)

2.    Explain the concept of learning organizations and its role in strategic management processes of organizations. (15 marks)

COURSE OUTLINE LEGAL FRAMEWORK OF BUSINESS

MBA 615 LEGAL FRAMEWORK OF BUSINESS

Contact hours: 42

Pre-requisites: None
Purpose: To provide the learner with knowledge of the legal environment in which businesses operate
Specific objectives

By the end of the course the learner should be able to:-
i) Explain the meaning and purpose of law
ii) Explain the sources of law
iii) Explain the concept of legal personality in relation to corporations, partnerships and other unincorporated associations
iv) Identify the various dispute resolution mechanisms

Course Content

Conceptual framework, the concept of legal personality, business ethics and law, consumer protection, employer/employee obligations, business and development, guarantee and indemnity, insurance business, negotiable instruments, agency, partnerships, commercial arbitration and alternative dispute resolution, bankruptcy and insolvency, business at international level.
Teaching / Learning Methodologies: Lectures and tutorials; group discussion; demonstration; Individual assignment; Case studies

Instructional Materials and Equipment: Projector; test books; design catalogues; computer laboratory; design software; simulators

Course Assessment

Examination - 70%; Continuous Assessment Test (CATS) and Assignments - 30%; Total - 100%
Recommended Text Books
i) Mathur (2009); Business Law; Tata Mcgraw Hill
ii) John Rush (2006); Business Law; Thomson Learning
Text Books for further Reading
i) Keith Abbott (2002); Business Law; Thomson Learning

GAP ANALYSIS AND STRATEGIC CHOICE notes

GAP ANALYSIS AND STRATEGIC CHOICE

In business and economics, gap analysis is a tool that helps companies compare actual performance with potential performance. At its core are two questions: "Where are we?" and "Where do we want to be?" If a company or organization does not make the best use of current resources, or forgoes investment in capital or technology, it may produce or perform below its potential.

Gap Analysis can be defined as the evaluation of the difference between a desired outcome and an actual outcome. This difference is called a gap. Strategic gap analysis attempts to determine what a company should do differently to achieve a particular goal by looking at the time frame, management, budget and other factors to determine where shortcomings lie

Gap analysis identifies gaps between the optimized allocation and integration of the inputs (resources), and the current allocation level. This reveals areas that can be improved. Gap analysis involves determining, documenting, and approving the variance between business requirements and current capabilities. Gap analysis naturally flows from benchmarking and other assessments. Once the general expectation of performance in the industry is understood, it is possible to compare that expectation with the company's current level of performance. This comparison becomes the gap analysis. Such analysis can be performed at the strategic or operational level of an organization.
Gap analysis is a formal study of what a business is doing currently and where it wants to go in the future. It can be conducted, in different perspectives, as follows:
1. Organization (e.g., human resources)
2. Business direction
3. Business processes
4. Information technology

Gap analysis provides a foundation for measuring investment of time, money and human resources required to achieve a particular outcome. The need for new products or additions to existing lines may emerge from portfolio analysis, in particular from the use of the Boston Consulting Group Growth-share matrix—or the need may emerge from the regular process of following trends in the requirements of consumers. At some point, a gap emerges between what existing products offer and what the consumer demands. The organization must fill that gap to survive and grow.

Gap analysis can identify gaps in the market. Thus, comparing forecast profits to desired profits reveals the planning gap. This represents a goal for new activities in general, and new products in particular. The planning gap can be divided into three main elements:

1. Usage gap
This is the gap between the total potential for the market and actual current usage by all consumers in the market. Data for this calculation includes:
a. Market potential- The maximum number of consumers available is usually determined by market research, but it may sometimes be calculated from demographic data or government statistics.
b. Existing usage- Existing consumer usage makes up the total current market, from which market shares are calculated.
c. Current industrial potential- usage gap = market potential – existing usage
Usage gap is most important for brand leaders. If a company has a significant share of the whole market, they may find it worthwhile to invest in making the market bigger.

2. Product gap
The product gap—also called the segment or positioning gap—is that part of the market a particular organization is excluded from because of product or service characteristics. This may be because the market is segmented and the organization does not have offerings in some segments, or because the organization positions its offerings in a way that effectively excludes certain potential consumers—because competitive offerings are much better placed for these consumers.

3. Competitive gap
The competitive gap is the share of business achieved among similar products, sold in the same market segment and with similar distribution patterns or at least, in any comparison, after such effects have been discounted. The competitive gap represents the effects of factors such as price and promotion, both the absolute level and the effectiveness of its messages.

CONCEPT OF STRATEGIC CHOICE

Change is making things different. It is departure from status quo. Environment forces change. The effects of change are widespread. Organizations that fail to change die. Change is a fundamental part of organizational survival. Ability to adapt to change is the essence of organizational effectiveness.
A strategic change implies change in strategy through diagnosis and management of change needs. It consists of rethinking reviewing, and changing strategy to adapt to environmental changes and the changing resources and competencies.
Types of strategy change

• Adaptation: This change in strategy occurs incrementally. It can be accommodated within the current paradigm. It involves realignment. This is the most common form of change in strategy.
• Reconstruction: This change is strategy occurs rapidly. But it does not lead to fundamental change in paradigm. For example, structural change or cost-cutting program.
• Evaluation: This change in strategy occurs over time. It requires paradigm change. It is transformational change. Learning organizations continually change their strategies to environmental changes.
• Revaluation :This change in strategy occurs very rapidly with a big bang. It requires fundamental change is paradigm. For example, significant decline in profit may require revolutionary change in strategy. So can of focus from selling to customer satisfaction.

Strategic choice is selection of the best strategic option that helps achieve organization's objectives. Relevant strategic options are evaluated their suitability, acceptability and feasibility. The evaluated strategic options are ranked in order of their potential to achieve objective. Such options should allow businesses to maintain or create sustainable strategic advantage. The strategic choice is made from among the ranked alternative.

Approaches for strategic choice

·       Planned approach: This approach involves formal appraisal of the relevant strategic options for suitability, acceptability and feasibility. The appraised options are ranked in terms of their potential for objective achievement. The choice of the best options is made.

·       Enforced choice approach: An organization has various stakeholders. The dominate stakeholders play an important role in strategic choice. Their expectations considered

·       Experience based approach: Managers possess an experience curve. Past experience of managers in strategy implementation serves as a guideline for strategic choice.

·       Command approach: The strategic choice is based on the command of top management. It is top down approach.

STRATEGY FORMULATION

Formulating strategies entails determining appropriate course of action for achieving organizational objectives. it involves such activities such as:

·       Analysis

·       Planning

·       Selecting strategies

According to Kenneth R. Andrews, the principal sub activities of strategy formulation as a logical activity include identifying opportunities and threats in the company’s environment and attaching some estimates or risk to the discernible alternatives. Before a choice can be made, the company’s  strengths and weaknesses should be appraised together with the resources on hand  and available  ones. the strategic alternative  which results  from matching opportunity and corporate capability at acceptable level of risks is what is known as economic strategy

THREE ASPECTS OF STRATEGY FORMULATION

The following three aspects or levels of strategy formulation, each with a different focus, need to be dealt with in the formulation phase of strategic management.  The three sets of recommendations must be internally consistent and fit together in a mutually supportive manner that forms an integrated hierarchy of strategy, in the order given.

CORPORATE LEVEL STRATEGY

This comprises the overall strategy elements for the corporation as a whole i.e. the grand strategy.  Corporate strategy involves the following  kinds of initiatives:

·   Making the necessary moves to establish positions in different businesses and achieve an appropriate amount and kind of diversification.  A key part of corporate strategy is making decisions on how many, what types, and which specific lines of business the company should be in.  This may involve deciding to increase or decrease the amount and breadth of diversification.  It may involve closing out some LOB's (lines of business), adding others, and/or changing emphasis among LOB's.

·   Initiating actions to boost the combined performance of the businesses the company has diversified into:  This may involve vigorously pursuing rapid-growth strategies in the most promising LOB's, keeping the other core businesses healthy, initiating turnaround efforts in weak-performing LOB's with promise, and dropping LOB's that are no longer attractive or don't fit into the corporation's overall plans.  It also may involve supplying financial, managerial, and other resources, or acquiring and/or merging other companies with an existing LOB.

·   Pursuing ways to capture valuable cross-business strategic fits and turn them into competitive advantages -- especially transferring and sharing related technology, procurement leverage, operating facilities, distribution channels, and/or customers.

Strategy Components.

They include:

·   Growth strategies

·   Stability strategies

·   Retrenchment strategies

Growth Strategies

All growth strategies can be classified into one of two fundamental categories:  concentration within existing industries or diversification into other lines of business or industries.  When a company's current industries are attractive, have good growth potential, and do not face serious threats, concentrating resources in the existing industries makes good sense.  Diversification tends to have greater risks, but is an appropriate option when a company's current industries have little growth potential or are unattractive in other ways

               Concentration Strategies

a.     Horizontal integration

When affirms long-term strategy is based on growth through the acquisition of one or more  similar firms operating at the same stage of the production marketing chain, its grand strategy is called horizontal integration. Such acquisitions eliminate competitors and provide the acquiring firm with access to new markets.

Some examples of horizontal integration

·       A media company’s ownership of radio, television, newspapers’, books and magazine

·       An automobile manufactures acquisition of a sport utility vehicle manufacturer

b. Vertical Integration

When a firm’s grand strategy is to acquire firms that supply it with inputs such as raw materials or are customers for its output such as warehouses for finished products is involved to vertical integration. Expansion of activities downstream is referred to as forward integration, and expansion upstream is referred to as backward integration. The concept of vertical integration can be visualized using the value chain. Consider a firm whose products are made via an assembly process. such a firm may consider backward integrating into intermediate manufacturing or forward integrating into distribution.

Diversification strategies

a.      Concentric Diversification

This is a grand strategy which involves the acquisition of business that are related to the acquiring firm in terms of technology, markets or products. With this strategy, the selected new businesses possess a high degree of compatibility with the firms current businesses.  
Adding new, but related, products or services is widely called concentric diversification.

The ideal concentric diversification occurs when the combined company profits increase the strengths and opportunities and decrease the weaknesses and exposure to risk. Thus, the acquiring firm searches for new businesses whose products, markets, distribution channels, technologies and resource requirements are similar to  but not identical with its own, whose acquisitions results in synergies but not complete interdependence.

b.      Conglomerate Diversification

Adding new, unrelated products or services is called conglomerate diversification. Some firms pursue conglomerate diversification based in part on an expectation of profits from breaking up acquired firms and selling divisions piecemeal. A grand strategy that involves the acquisition of a business because it presents the most promising investment opportunity available. The principal concern, and often the sole concern, of acquiring firm is the profit pattern of the venture. Unlike concentric diversification, conglomerate diversification gives little concern to crating product market synergy with existing businesses.

The principal difference between the two types of diversification is that concentric diversification emphasizes some commonality in markets, products, or technology whereas conglomerate diversification is based principally on profit considerations

Stability Strategies

There are a number of circumstances in which the most appropriate growth stance for a company is stability, rather than growth.  Often, this may be used for a relatively short period, after which further growth is planned.  Such circumstances usually involve a reasonable successful company, combined with circumstances that either permit a period of comfortable coasting or suggest a pause or caution.  Three alternatives are outlined below, in which the actual strategy actions are similar, but differing primarily in the circumstances motivating the choice of a stability strategy and in the intentions for future strategic actions.

1.  Pause and Then Proceed:  This stability strategy alternative (essentially a timeout)  may be appropriate in either of two situations:  (a) the need for an opportunity to rest, digest, and consolidate after growth or some turbulent events - before continuing a growth strategy, or (b) an uncertain or hostile environment in which it is prudent to stay in a "holding pattern" until there is change in or more clarity about the future in the environment.

2.  No Change:  This alternative could be a cop-out, representing indecision or timidity in making a choice for change.  Alternatively, it may be a comfortable, even long-term strategy in a mature, rather stable environment, e.g., a small business in a small town with few competitors.

3.  Grab Profits While You Can:  This is a non-recommended strategy to try to mask a deteriorating situation by artificially supporting profits or their appearance, or otherwise trying to act as though the problems will go away. It is an unstable, temporary strategy in a worsening situation, usually chosen either to try to delay letting stakeholders know how bad things are or to extract personal gain before things collapse.  Recent terrible examples in the USA are Enron and WorldCom.

Retrenchment Strategies

Turnaround:  This strategy, dealing with a company in serious trouble, attempts to resuscitate or revive the company through a combination of contraction (general, major cutbacks in size and costs) and consolidation (creating and stabilizing a smaller, leaner company).  Although difficult, when done very effectively it can succeed in both retaining enough key employees and revitalizing the company.

Captive Company Strategy:  This strategy involves giving up independence in exchange for some security by becoming another company's sole supplier, distributor, or a dependent subsidiary.

Sell Out:  If a company in a weak position is unable or unlikely to succeed with a turnaround or captive company strategy, it has few choices other than to try to find a buyer and sell itself (or divest, if part of a diversified corporation).

Liquidation:  When a company has been unsuccessful in or has none of the previous three strategic alternatives available, the only remaining alternative is liquidation, often involving a bankruptcy.  There is a modest advantage of a voluntary liquidation over bankruptcy in that the board and top management make the decisions rather than turning them over to a court, which often ignores stockholders' interests.

Portfolio Strategy

This second component of corporate level strategy is concerned with making decisions about the portfolio of lines of business (LOB's) or strategic business units (SBU's), not the company's portfolio of individual products.

Portfolio matrix models can be useful in reexamining a company's present portfolio.  The purpose of all portfolio matrix models is to help a company understand and consider changes in its portfolio of businesses, and also to think about allocation of resources among the different business elements.  The two primary models are the BCG Growth-Share Matrix and the GE Business Screen (Porter, 1980, has a good summary of these).  These models consider and display on a two-dimensional graph each major SBU in terms of some measure of its industry attractiveness and its relative competitive strength

          The BCG Growth-Share Matrix model considers two relatively simple variables:  growth rate of the industry as an indication of industry attractiveness, and relative market share as an indication of its relative competitive strength.  The GE Business Screen, also associated with McKinsey, considers two composite variables, which can be customized by the user, for (a) industry attractiveness (e.g, one could include industry size and growth rate, profitability, pricing practices, favored treatment in government dealings, etc.) and (b) competitive strength (e.g., market share, technological position, profitability, size, etc.)

          The best test of the business portfolio's overall attractiveness is whether the combined growth and profitability of the businesses in the portfolio will allow the company to attain its performance objectives.  Related to this overall criterion are such questions as:

          *   Does the portfolio contain enough businesses in attractive industries?

          *   Does it contain too many marginal businesses or question marks?

          *   Is the proportion of mature/declining businesses so great that growth will be sluggish?

          *   Are there some businesses that are not really needed or should be divested?

          *   Does the company  have its share of industry leaders, or is it burdened with too many businesses in modest competitive positions?

          *   Is the portfolio of SBU's and its relative risk/growth potential consistent with the strategic goals?

          *   Do the core businesses generate dependable profits and/or cash flow?

          *   Are there enough cash-producing businesses to finance those needing cash

          *   Is the portfolio overly vulnerable to seasonal or recessionary influences?

          *   Does the portfolio put the corporation in good position for the future?

The Parenting Strategy

This third component of corporate level strategy, relevant for a multi-business company, is concerned with how to allocate resources and manage capabilities and activities across the portfolio of businesses. It includes evaluating and making decisions on the following:

          *   Priorities in allocating resources (which business units will be stressed)

          *   What are critical success factors in each business unit, and how can the company do well on them

          *   Coordination of activities (e.g., horizontal strategies) and transfer of capabilities among business units

          *   How much integration of business units is desirable.

COMPETITIVE (BUSINESS LEVEL) STRATEGY

In this second aspect of a company's strategy, the focus is on how to compete successfully in each of the lines of business the company has chosen to engage in.  The central thrust is how to build and improve the company's competitive position for each of its lines of business.  A company has competitive advantage whenever it can attract customers and defend against competitive forces better than its rivals.  Companies want to develop competitive advantages that have some sustainability (although the typical term "sustainable competitive advantage" is usually only true dynamically, as a firm works to continue it).  Successful competitive strategies usually involve building uniquely strong or distinctive competencies in one or several areas crucial to success and using them to maintain a competitive edge over rivals.  Some examples of distinctive competencies are superior technology and/or product features, better manufacturing technology and skills, superior sales and distribution capabilities, and better customer service and convenience.

Competitive strategy is about being different.  It means deliberately choosing to perform activities differently or to perform different activities than rivals to deliver a unique mix of value. (Michael E. Porter)

Porter's Four Generic Competitive Strategies

1. Overall Price (Cost) Leadership:  appealing to a broad cross-section of the  market by providing products or services at the lowest price.  This requires being the overall low-cost provider of the products or services.   Implementing this strategy successfully requires continual, exceptional efforts to reduce costs -- without excluding product features and services that buyers consider essential.  It also requires achieving cost advantages in ways that are hard for competitors to copy or match.  Some conditions that tend to make this strategy an attractive choice are:

          *   The industry's product is much the same from seller to seller

          *   The marketplace is dominated by price competition, with highly price-sensitive buyers

          *   There are few ways to achieve product differentiation that have much value to buyers

          *   Most buyers use product in same ways -- common user requirements

          *   Switching costs for buyers are low

          *   Buyers are large and have significant bargaining power

2. Differentiation:  appealing to a broad cross-section of the market through offering differentiating features that make customers willing to pay premium prices, e.g., superior technology, quality, prestige, special features, service, convenience (examples are Nordstrom and Lexus).  Success with this type of strategy requires differentiation features that are hard or expensive for competitors to duplicate.  Sustainable differentiation usually comes from advantages in core competencies, unique company resources or capabilities, and superior management of value chain activities.  Some conditions that tend to favor differentiation strategies are:

          *   There are multiple ways to differentiate the product/service that buyers think have substantial value

          *   Buyers have different needs or uses of the product/service

          *   Product innovations and technological change are rapid and competition emphasizes the latest product features

          *   Not many rivals are following a similar differentiation strategy

3. Price (Cost) Focus:  a market niche strategy, concentrating on a narrow customer segment and competing with lowest prices, which, again, requires having lower cost structure than competitors (e.g., a single, small shop on a side-street in a town, in which they will order  electronic equipment at low prices, or the cheapest automobile made in the former Bulgaria). Some conditions that tend to favor focus (either price or differentiation focus) are:

          *   The business is new and/or has modest resources

          *   The company lacks the capability to go after a wider part of the total market

          *   Buyers' needs or uses of the item are diverse; there are many different niches and segments in the industry

          *   Buyer segments differ widely in size, growth rate, profitability, and intensity in the five competitive forces, making some segments more attractive than others

          *   Industry leaders don't see the niche as crucial to their own success

          *   Few or no other rivals are attempting to specialize in the same target segment

4. Differentiation Focus: a second market niche strategy, concentrating on a narrow customer segment and competing through differentiating features (e.g., a high-fashion women's clothing boutique in Paris, or Ferrari).

Competitive Tactics

Although a choice of one of the generic competitive strategies discussed in the previous section provides the foundation for a business strategy, there are many variations and elaborations.  Among these are various tactics that may be useful (in general, tactics are shorter in time horizon and narrower in scope than strategies         Two categories of competitive tactics are those dealing with timing (when to enter a market) and market location (where and how to enter and/or defend).

          Timing Tactics:  When to make a strategic move is often as important as what move to make.  We often speak of first-movers (i.e., the first to provide a product or service), second-movers or rapid followers, and late movers (wait-and-see).  Each tactic can have advantages and disadvantages.

Being a first-mover can have major strategic advantages when:

(a) Doing so builds an important image and reputation with buyer

 (b) Early adoption of new technologies, different components, exclusive distribution channels, etc. can produce cost and/or other advantages over rivals

 (c) first-time customers remain strongly loyal in making repeat purchases

 (d) Moving first makes entry and imitation by competitors hard or unlikely.

              Market Location Tactics:  These fall conveniently into offensive and defensive tactics. Offensive tactics are designed to take market share from a competitor, while defensive tactics attempt to keep a competitor from taking away some of our present market share, under the onslaught of offensive tactics by the competitor.  Some offensive tactics are:

          *   Frontal Assault:  going head-to-head with the competitor, matching each other in every way.  To be successful, the attacker must have superior resources and be willing to continue longer than the company attacked.

          *   Flanking Maneuver:  attacking a part of the market where the competitor is weak.  To be successful, the attacker must be patient and willing to carefully expand out of the relatively undefended market niche or else face retaliation by an established competitor.

          *   Encirclement:  usually evolving from the previous two, encirclement involves encircling and pushing over the competitor's position in terms of greater product variety and/or serving more markets.  This requires a wide variety of abilities and resources necessary to attack multiple market segments.

          *   Bypass Attack:  attempting to cut the market out from under the established defender by offering a new, superior type of produce that makes the competitor's product unnecessary or undesirable.

          *   Guerrilla Warfare:  using a "hit and run" attack on a competitor, with small, intermittent assaults on different market segments.  This offers the possibility for even a small firm to make some gains without seriously threatening a large, established competitor and  evoking some form of retaliation.

       Some Defensive Tactics are:

          *   Raise Structural Barriers:  block avenues challengers can take in mounting an offensive

          *   Increase Expected Retaliation:  signal challengers that there is threat of strong retaliation if they attack

          *   Reduce Inducement for Attacks:  e.g., lower profits to make things less attractive (including use of accounting techniques to obscure true profitability).  Keeping prices very low gives a new entrant little profit incentive to enter.

Cooperative Strategies

Another group of "competitive" tactics involve cooperation among companies.  These involve an agreement or alliance between two or more businesses formed to achieve strategically significant objectives that are mutually beneficial. Some are very short-term; others are longer-term and may be the first stage of an eventual merger between the companies.

          Some of the reasons for strategic alliances are to:  obtain/share technology, share manufacturing capabilities and facilities, share access to specific markets, reduce financial/political/market risks, and achieve other competitive advantages not otherwise available.  There could be considered a continuum of types of strategic alliances, ranging from:  (a) mutual service consortiums (e.g., similar companies in similar industries pool their resources to develop something that is too expensive alone), (b) licensing arrangements, (c) joint ventures (an independent business entity formed by two or more companies to accomplish certain things, with allocated ownership, operational responsibilities, and financial risks and rewards), (d) value-chain partnerships (e.g., just-in-time supplier relationships, and out-sourcing of major value-chain functions).

FUNCTIONAL STRATEGIES

Functional strategies are relatively short-term activities that each functional area within a company will carry out to implement the broader, longer-term corporate level and business level strategies.  Each functional area has a number of strategy choices, that interact with and must be consistent with the overall company strategies.

          Three basic characteristics distinguish functional strategies from corporate level and business level strategies:

·  shorter time horizon,

·   greater specificity,

·  Primary involvement of operating managers.

          A few examples follow of functional strategy topics for the major functional areas of marketing, finance, production/operations, research and development, and human resources management.  Each area needs to deal with sourcing strategy, i.e., what should be done in-house and what should be outsourced?

          Marketing strategy deals with product/service choices and features, pricing strategy, markets to be targeted, distribution, and promotion considerations.  Financial strategies include decisions about capital acquisition, capital allocation, dividend policy, and investment and working capital management.  The production or operations functional strategies address choices about how and where the products or services will be manufactured or delivered, technology to be used, management of resources, plus purchasing and relationships with suppliers.  For firms in high-tech industries, R&D strategy may be so central that many of the decisions will be made at the business or even corporate level, for example the role of technology in the company's competitive strategy, including choices between being a technology leader or follower.  However, there will remain more specific decisions that are part of R&D functional strategy, such as the relative emphasis between product and process R&D, how new technology will be obtained (internal development vs. external through purchasing, acquisition, licensing, alliances, etc.), and degree of centralization for R&D activities.  Human resources functional strategy includes many topics, typically recommended by the human resources department, but many requiring top management approval.  Examples are job categories and descriptions; pay and benefits; recruiting, selection, and orientation; career development and training; evaluation and incentive systems; policies and discipline; and management/executive selection processes.

CHOOSING THE BEST STRATEGY ALTERNATIVES

Here are some factors to consider when choosing among alternative strategies:

          *   It is important to get as clear as possible about objectives and decision criteria (what makes a decision a "good" one?)

          *   The primary answer to the previous question, and therefore a vital criterion, is that the chosen strategies must be effective in addressing the "critical issues" the company faces at this time

          *   They must be consistent with the mission and other strategies of the organization

          *   They need to be consistent with external environment factors, including realistic assessments of the competitive environment and trends

          *   They fit the company's product life cycle position and market attractiveness/competitive strength situation

          *   They must be capable of being implemented effectively and efficiently, including being realistic with respect to the company's resources

          *   The risks must be acceptable and in line with the potential rewards

          *   It is important to match strategy to the other aspects of the situation, including:  (a) size, stage, and growth rate of industry; (b) industry characteristics, including fragmentation, importance of technology, commodity product orientation, international features; and (c) company position (dominant leader, leader, aggressive challenger, follower, weak, "stuck in the middle")

          *   Consider stakeholder analysis and other people-related factors (e.g., internal and external pressures, risk propensity, and needs and desires of important decision-makers)

          *   Sometimes it is helpful to do scenario construction, e.g., cases with optimistic, most likely, and pessimistic assumptions.