External expansion refers to business combination where two or more concerns combines and expand their business activities. The ownership and control of the combined concerns may be undertaken by a single agency. Business combination is a method of economic organization by which a common control, of greater or lesser completeness is exercised over a number of firms which either is operating in competition or independently. This control may either be temporary or permanent, for all or only for some purposes. This control over the combining firm can be exercised by a number of methods which in turn give rise to various forms of combinations. In the process of combination, two or more units engage in similar business or in different related process or sages of the same business join with a view to carry on their activities or shape or shape their polices on common or coordinated basis for mutual Continue reading
Strategic Management Terms
Mass Customization – Dynamic Stability Product/Process Matrix
Mass Customization Concept “It is the customer who determines what a business is” – Drucker, 1954 The concept of mass customization was coined by Stan Davis in 1987, in his book “Future Perfect”. In this book, he emphasizes that in traditional industrial production there is on the one hand mass production, using economies of scale to produce goods at low costs, but with nearly no variety or on the other hand individual production with a high degree of variety but in small volumes with high costs. Joseph Pine, an IBM-executive turned consultant and author who is the father of the mass customization concept, in his 1993 book “Mass Customization — A New Frontier in Business Competition”, outlines more about Mass Customization. “developing, producing, marketing and delivering affordable goods, and services with enough variety and customization that nearly everyone finds exactly what they want.” – Joseph Pine, 1993 “Mass customization is a system Continue reading
Business Clusters
In a globalized economy, companies can access capital, goods, information and technology from all parts of the world. Thanks to faster methods of transportation and communication, physical location has become less important. Yet, there are geographic concentrations of industrial activities. For example, Silicon Valley in California is reputed for its cluster of computer hardware and software companies. Even though it is a very expensive location, many tech companies continue to perform their key value adding activities in this region. Michael Porter uses the term “clusters” to describe geographical concentrations of interconnected companies and institutions in a particular business. Business clusters include suppliers of components, machinery, services and institutions which provide specialized infrastructure. Sophisticated, demanding customers who keep companies on their toes can also be considered a part of the cluster. So can the local government, universities, research centers and think-tanks who play a vital role in encouraging innovation and creating Continue reading
Stakeholder, Dynamic Capabilities and Sustainable Development Approaches to Strategic Management
Strategic management is the process regulated and formatted by the top level management in accordance with the policies and the rules of the top level management. These are developed in order to acquire the market share as well as to attain the goals and the objectives in the target market. The strategies developed and adopted by the management are the tools through which the efficiency could easily be enhanced in order to attain the desired goals and the objectives for the organization. Apart from these, there are certain actions which are implemented by the top level management on behalf of the directors and the organizational owners in order to attain the better and effective outcomes. For implementation of the tools and the techniques, organization is required to analyze the internal and external environment. This will help the management to adopt certain crucial set of strategies through which organization could be Continue reading
Reverse Merger – Meaning and Example
Normally, a small company merges with large company or a sick company with healthy company. However in some cases, reverse merger is done. When a healthy company merges with a sick or a small company is called reverse merger. This may be for various reasons. Some reasons for reverse merger are: The transferee company is a sick company and has carry forward losses and transferor Company is profit making company. If transferor Company merges with the sick transferee company, it gets advantage of setting off carry forward losses without any conditions. If sick company merges with healthy company, many restrictions are applicable for allowing set off. The transferee company may be listed company. In such case, if transferor Company merges with the listed company, it gets advantages of listed company, without following strict norms of listing of stock exchanges. In such cases, it is provided that on date of merger, Continue reading
What is Departmentalization?
Departmentalization is the grouping of activities and responsibilities by sub-units of the organization. These sub-units are called departments. The division of labor or degree of departmentalization is driven by the need for specialization whether by process or purpose within an organization. The most common way of process departmentalization is the division of the firm into business functions, such as purchasing, manufacturing, sales, accounting, etc. Departmentalization specifies how employees and their activities are grouped together. It is a fundamental strategy for coordinating organizational activities, because it influences organizational behavior in the following ways: Departmentalization establishes the chain of command – the system of common supervision among positions and units within the organization. It frames the membership of formal work teams and typically determines which positions and units must share resources. Thus, departmentalization establishes interdependencies among employees and subunits. Departmentalization focuses people around common mental models or ways of thinking, such as Continue reading