Course Work for Business Administration

ST. LAWRENCE

UNIVERSITY

FACULTY OF BUSINESS & MANAGEMENT STUDIES

COURSE UNIT: BUSINESS ADMINISTRATION

COURSE CODE: 1206

COURSE WORK: TWO

NAME: TAVIAN RODNEY TAMALE

REG NO: BABA/07/D/004

LECTURER: DR. J.B BIRETWA

DATE: 19th October 2010
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DECLARATION. I Tavian Rodney Tamale declare that this work of mine after thorough research is my own and it has not been issued by any one for the award of degree, diploma or certificate. I therefore bear to stand any inconsistence in it.

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ACKNOWLEDGEMENTS

I am very grateful to a number of persons for their support they gave during my research of this work. First to my friends who borrowed me some of the text books that I used in the research of this work. Secondly, to my facilitator Dr. J.B.Biretwa for his guidance in the lecture time and also giving us this assessment to test my ability in understanding the course. I cannot forget to thank my sponsors for entrusting me with their faith to see me reach this level through the financial and moral support. I also acknowledge all authors of the books I have consulted while compiling this work. This work is not a substitute but a compliment to their books. May the Almighty reward all that have directly and indirectly facilitated the final outcome of this work, much love!

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2(a) What do you understand by the term management by objectives(MBO)? (b) What are the advantages and disadvantages of using this concept?

6(a) what is a strategic management in the study of business administration? (b) What is a strategy? (c) What is innovation?

8. Write notes on five (5) of the following: o Motivation. o Project. o Decision- making. o Decentralization. o Marketing.

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Discuss the following topics in the study of business administration. (a) International management. (b) International marketing.

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2. (a) Effective management is goal-oriented. The goals, thus, provide direction to managerial activities. The number of loss-making units is increasing every day, perhaps, because the management is not directed towards goals. Most of the managers today mistake their routine activities as their achievements and, therefore, lose track of the right path. The goal has to be well defined. According to Terry and Franklin, “A managerial objective is the intended goal that prescribes definite scope and suggests direction to the planning effort of a manager.” The term ‘objective’ emphasizes on four main aspects:
(1) Goal: The subsistence of an organization depends on the goal that it intends to

achieve. The goal gives direction to planning, organizing and other managerial activities. It is the target which the managers aim to achieve.
(2) Definiteness: The goals should be definite, i.e. clear and precise. They should not be

subject to different interpretations by different people. Unless all the organizational activities are headed towards the same goal, managerial efficiency has little or no meaning. (3) Scope: It defines the area of operations, the boundaries within which various activities should be carried out.
(4) Direction: All organizational activities are directed towards stated goals; therefore it

is very essential that goals are set after a very careful study of different constraints within which an organization works. Koontz and Weihrich define a hierarchy of goals which stated that an organization sets its goals with the broad objective of discharging its social responsibilities towards the environment and finally comes down to the level of setting goals for each individual working in the organization. This hierarchy of goals follows the following pattern: Social goals. Purposes /Mission. Overall organizational goals. Specific organizational goals. Divisional goals. Departmental goals. Individual goals.

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Social goals may be the goals to provide employment opportunities to the society; followed by the mission of the organization, to produce the quality goods and services the least possible cost; overall organizational goals are the long-term goals, to use the best available technology and follow the marketing strategies to be able to produce and sell the goods at the right price; Specific organizational goals relate to goals set for the key or specific areas of operation, for example, setting up a goal to improve the competitive strength of the firm and increase the market share of its products; divisional and departmental goals are goals set for division like production, marketing etc; followed by goals set for each individual unit of a department and for individuals who are actually carrying out the activities. This hierarchy of goals assumes the involvement of managers at all levels. The social goals, purposes, overall and specific organizational goals are normally taken off by the top-level managers; the middle-level managers look after the divisional and departmental goals and goalsetting for individuals is the primary concern of managers at the lower-level. The setting up of goals or objectives became so important in the business world that the concept of management by objectives (MBO) propounded by Peter F. Drucker came to limelight in the year 1954. It is also known as ‘Results Management; Goals Management; Management by results or Management by Mission.’ Basic principle underlying the theory of MBO is the participative style of management. It aims at setting goals through constant interaction of superiors and subordinates. Therefore MBO has several definitions according to different authors as seen below; According to; Dale McConkey, ‘management by objectives is an approach targets are laid down for a specified period of time, usually annually, and results are measured against these targets at the end of the period. Managers and subordinates meet after the specified period of time (normally annually), review the subordinates’ achievements towards the goals set in the MBO cycle, discuss the problems they have faced in their achievements and arrive at solutions to those problems. This performance evaluation serves as a basis for setting objectives for the next MBO cycle.

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Koontz and Weihrich define MBO as, “a comprehensive managerial system that integrates many key managerial activities in a systematic manner and that is consciously directed toward the effective and efficient achievement of organizational and individual objectives.” According to Terry, “it is a system in which each employee participates in determining personal objectives as well as the means by which he or she hopes to achieve these objectives.”

(b)

Advantages of Management by objectives (MBO). The above discussion on MBO is illustrative of its effectiveness in both, a business

organization and a non-business organization, as also at every level of the organization. The system works for the benefit of the individuals and the organizations. The positive attributes of MBO can be enumerated as follows:
I.

Helps in setting realistic goals – The participation of employees in the goal-setting process enables them to envision their strengths and weaknesses in relation to the organization and the extent to which they can contribute towards the overall goals. Thus, the possibility of setting goals which are not capable of being achieved gets reduced. Also, since managers at all levels are involved in setting the goals, the goals set are more realistic in nature.

II.

Helps in making planning effective – Good planning is always goal oriented. If the goals are set after giving due consideration to all internal and external environmental factors and the capacities of organizations and individuals to achieve these objectives, the planning will also be result-oriented and the possibility of actual performance conforming to the planned performance gets enhanced.

III.

Helps in creating an effective communication network – Whatever the approach followed for implementing MBO, whether top-down or bottom-up, it involves active interaction, discussion and participation of superiors and subordinates, and creates an effective and an open communication system in the organization.

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IV.

Facilitates employee involvement – The employees acknowledge the fact that since the goals have been determined through their active participation, they carry out their part of the job more actively and willingly and, thus, a better sense of understanding and involvement is promoted in the organization.

V.

Improves employer-employee relationship - The setting of goals improves the relationship between the employers and employees. This creates a healthy environment of co-operation, integration and co-ordination and organizational goals are attempted to be achieved with more zeal and enthusiasm.

VI.

Promotes the system of self-appraisal – The process of MBO presumes presence of the self-appraisal system. As the employees set their own goals, they feel more committed towards the attainment of these goals and try to move discrepancies in their task performance to bring it in conformity with the planned performance.

VII.

Facilitates control – The self-appraisal system promotes control of employees’ activities from within. Their sense of commitment to the organization helps in constant evaluation of their performance and acts as a controlling device. The controlling aids can also be applied by superiors, through constant review of the employees’ performance, measuring it with the planned performance and checking the deviations, if any, to ensure that the goals are effectively achieved.

VIII.

Furtherance of personality development – The fact that superior’s imbibe confidence in their subordinates promotes a feeling of involvement, recognition and commitment amongst the employees. Their behavioral attitude changes in a positive direction which leads to their ego satisfaction and furtherance of their personality development.

Henry L. Tosi and Stephen J. Carroll conducted a survey of managers and highlighted the following advantages of a well-organized MBO program: (1) It lets individuals know what is expected of them. (2) It aids in planning by making managers establish goals and target dates.
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(3) It improves communication between managers and subordinates.
(4) It makes individuals more aware of the organization's goals. (5) It makes the evaluation process more equitable by focusing on specific

accomplishments. It lets subordinates know how well they are doing in relation to the organization’s goals. Disadvantages/Draw backs of MBO The benefits accruing from MBO are of undoubtful validity, yet the approach is not free from criticism. The opponents of this theory offer the following arguments against the effective implementation of MBO. The drawbacks of MBO can be categorized as:  Drawbacks inherent in the approach
 Drawbacks arising out of implementation of the approach

1.0.

Drawbacks inherent in the approach:
(1) Time, money and effort – Not all superiors and subordinates have full knowledge

about the concept of MBO and, therefore, have to acquire this skill. This requires spending of time, money and effort, both on the part of superiors and subordinates.
(2) Illusionary approach – The approach seems to be an illusion in the sense that the

setting of the overall and individuals goals presupposes the fact that if each individual completes his part of the job, it would lead to accomplishment of overall goals. It ignores the fact that the goals of different individuals may also differ from each other and there is, thus, the need to study the impact of one individual’s goal on that of the other. The individual goal setting should, thus, be replaced by group-goal setting. 1.1. Drawbacks arising out of implementation of the approach:
(1) Improper use – MBO is generally considered as a process of setting goals by managers

and subordinates jointly and assessing the performance of the subordinates. It does not
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place emphasis on the ways and means to be devised for the accomplishment of these goals. Success cannot be achieved unless the procedures, schedules, and programmes are made so that every employee knows just not what to achieve but also how to achieve?
(2) lack of knowledge to set goals – For MBO to be effective, it is necessary for managers

and employees to sufficient knowledge of the organizational structure, goals and policies but unfortunately no all employees possess this knowledge and if the goals are set without rational and scientific understanding of the organization structure and strategic goals, the entire planning process might prove to be a failure.
(3) Ignorance of long-run perspective – Critics assert that MBO is a technique suitable for

setting short-term goals, usually one year, and unless all the managers foresee the suitability of these goals to achieve the long-term objectives, the technique does not serve its purpose. Goals must also be capable of adjusting themselves to the changing environment in future because every time there is a change, it is not easy, in fact, not possible to change the objectives.
(4) Zeigarnik effect – It is the effect propounded by a psychologist, B. Zeigarnik. It refers to

the force which drives a person to strive for the accomplishment of goals. A person with high Zeigarnik effect feels a sense of commitment towards the organization and actively works towards accomplishment of organizational goals. This satisfies their ego and psychological needs also. People with low Zeigarnik effect, on the other hand do not feel committed to work towards these goals. MBO proves to be ineffective if an organization has more number of people with low Zeigarnik effect.
(5) Conflict of opinion – The organizations may face the problem of coordinating the overall

goals with individual goals if either the superiors or the subordinates do not mutually agree to the goal setting process.
(6) Lack of top management support - Where the implementation of an MBO programme is

left solely to the lower-level managers, without the active involvement of top management, the programme is likely to be ineffectively implemented.

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(7) Flexibility to change – An MBO programme might require changes to be brought about

in an organisation’s existing structure and way of working. Unless the managers are ready to modify their current structure and practices, the MBO programme may not prove to be successful.

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6 (a) Strategic management [corporate strategy] It’s the study of the functions and responsibilities of top management of an organization. It studies how they combine and direct the efforts and activities of other members of the organization towards the successful completion of a stated mission or purpose. Policy or strategy is a term used to distinguish strategic management from Operational management which is day to day and short term oriented. Like many management concepts, strategic management has no precise definition. There are many definitions some of which are: “It is concerned primarily with relating the organization to its environment, formulating strategies to adapt to that environment and assuring that implementation of strategies takes place”. George Steiner etal. Strategic management focuses on top management and the total organization rather than on the single different parts of the organization. It thus studies the role of top executive as he looks at the total organization. The view of a top manager is unique. No one else in the organization has the same perspective. He has the broad picture. The whole of the organization and how the different parts relate to the whole. He alone is responsible for relating his organization to a changing environment. He alone is responsible for assuring the proper balance among various competing functions and for assuring the proper balance among various competing subsystems in his organization. He alone is responsible for determining the total thrust of the organization and for measuring that performance matches the desired goals.
(a) Strategic management essentially deals with the formulation and implementation of

strategy which is a key factor in the achievement of the goals of an organization. Strategy is thus central to the subject of strategic management. Strategy refers to a course of action. In the parlance of business organizations, it refers to the selection of a course of action out of the available courses in order to achieve the long-run goals through continuous and active interaction with environment. Strategy gives direction to organizational plans (to achieve its goals). It can also be defined as a means (way to achieve) to an end (the goal). In fact some authors view strategies as both the setting of objectives and the means of achieving these objectives by making proper plans and policies. Others view it only as means towards the achievement of pre-stated goals.
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(b) Innovation; This involve doing of new things or doing of things that are already being

done in a new way. This may also involve:     Launching of new product in the market. Introduction of new technology in production. Creation of new markets. Discovery of new and better sources of raw-materials

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8.

Motivation is the force that drives a person to action. In the context of business, when a

manager motivates a person, it means he inspires him to do a task that will lead to accomplishment of the organizational goals. Managers’ orders and instructions carry no meaning unless they are effectively followed and implemented by their subordinates. The subordinates shall follow these instructions only if they are both able and willing to do so. The creation of willingness in the subordinates to perform tasks that will lead to achievement of organizational goals is motivation. Motivation is a complex task because the factors that motivate an individual to work are themselves very complex and complicated. Financial incentives may be important for one worker while non-financial incentives may be important for the other. The manager must, therefore, be well equipped in the skills of determining as to what motivates the human behavior. In fact, motivation is an aspect of management where managers themselves need to be trained before they motivate their subordinates to execute the organizational tasks as per their orders and directions. An individual performs a particular behavioural activity, in the first instance, not because he wishes the organizational goals to be achieved but probably because that work will give him some financial rewards through which he can satisfy his personal needs and desires. The need is therefore the driving force that motivates human behavior in a given direction. Below are some of the definitions of motivation given by different management thinkers? According to Gibson: “motivation may be defined as the state of individual’s perspective which represents the strength of his or her propensity to exert effort toward some particular behavior”. According to Dublin: “motivation refers to expenditure of efforts towards a goal”. Steers and Porter: “motivation is the force that energizes behavior, gives direction to behavior and underlies the tendency to persist.”

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PROJECT: A project is a discrete set of activities that must be coordinated and managed to achieve a specified objectives. A project is time bound and is designed to deliver measurable benefits to a specified target group. Projects are the practical interventions at district level. The purpose of development projects is to solve problems that are not solvable by existing means. However, experience over the past twenty years has indicated that the achievements of many development projects have not matched expectations. Recent analysis has identified the inappropriateness of many of the tools and methods used in project design and management. Many of these methods were borrowed from the private sector or from government departments where they had been specifically designed for those bodies and the particular management structures they use. These methods have been found to be inadequate in terms of involving beneficiaries and clarifying problems and solutions. A major identified weakness has been that projects were being designed and implemented without beneficiary involvement at relevant stages, and local circumstances and important external factors were not sufficiently analyzed and the findings incorporated in to the project design. The systems of Project Cycle Management (PCM) and Logical Framework Approach (Logframe), which are being introduced in this manual, have been specifically created for development projects and are based on the lessons learnt from previous experience. Below are some of the lessons that have been learnt and the areas that need strengthening.   Linking sectoral programme initiatives clearly with project demand. Involving beneficiaries more fully at the outset in designing the project and securing their support and commitment.
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Understanding the real issues facing potential beneficiaries. Testing out your ideas to ensure they are the best way of achieving the objectives you want to deliver.

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Looking at evidence of what has been tried to solve similar problems elsewhere. Distinguishing between designing projects and writing project proposals.
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Taking full account of the verity of assumptions on which projects are dependent. Appreciating the social, cultural and political framework in which projects have to be implemented.

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Planning realistic time frames and cost plans. Having clear objectives and verifiable indicators for monitoring progress of projects.

Project cycle management (PCM): PCM is a method for managing projects systematically through their life-cycle, towards the achievement of strategic objectives. The cycle starts with district level policy and sectoral objectives, and moves identification of problems to be addressed and the development of solutions and working plans (or projects) that can be implanted and, on completion, evaluated. PCM has been developed over the past twenty years by practitioners in the field who themselves have been frustrated by the use of inappropriate methods and development tools for project planning and management. Decision-making: To decide is to adopt a course of action out of the available alternatives. In real life situations, we are daily engaged in the process of decision-making. According to J. W. Duncan, “A decision is a conscious choice to behave or think in a particular way in a given set of circumstances. When a choice had been made, a decision has been made.” Decision-making according to him is “the process of choosing a course of action from two or more alternatives.” Bartol and Martin define decision-making as “the process through which managers identify organizational problems and attempt to resolve them.” Stoner and Wankel define it as “the process by which course of action is selected as the way to deal with a specific problem.” The above definitions make it clear that decision-making is deciding what to do when managers are faced with a problem-solving situation and adopt one way of doing it out of the available courses/ways of doing it. Problem-solving and decision-making are, thus, inter-related.
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Situations of decision-making While making decisions, the managers face three types of situations or conditions:  Certainty  Uncertainty  Risk These three conditions fall on a single continuum with certainty and uncertainty falling at either extremes of the continuum and different situations of risks prevailing between the two ends. In fact, the degree of risk increases, as one moves from certainty to complete uncertainty.

Features of decision-making 1. Decision-making is a prerequisite to every managerial function though it is closely related to planning.
2. It is a process where one course of action is selected out of the available courses to solve

a specific problem. 3. Problem-solving provides the basis for decision-making as the decisions are required to be made only after the problems have been found. 4. Decisions are required to be made to solve organizational problems and to exploit the environmental opportunities.
5. It is a pervasive process which pervades both business and non-business organization. 6. Decision-making is not the prerogative of top managers only. Decisions are required to

be made at all levels in an organizational set up. 7. It functions under every situation – certainty, risk or uncertainty.

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8. It is situational in nature. Different situations (both internal and external to the

organizations) require different decisions to be made by managers. Nature of decision-making i. ii. iii. iv. Problem solving Problem finding like economic values, political values etc Alarming situations for decision-making like deviation from plans. Problems that require decision-making such as crisis, non-crisis and opportunity.

Decentralization: It is passing on of the authority to make decisions to the lowest possible level in the organizational hierarchy. Decentralization, in fact, is delegation of authority to the maximum possible extent. As Allen puts it, “Decentralization refers to the systematic effort to delegate to the lowest levels all authority except that which can only be exercised at central points.”Decentralization is essential but how much should the managers decentralize depends on various factors. The important determinants of decentralization can be classified into two main categories:   External factors affecting decentralization. Internal factors affecting decentralization.

External factors affecting decentralization – the factors which are external to organization and are beyond the control of managers are:
1. Environment – If the firms are operating in an environment where the customers and

suppliers are dispersed, the competition is not intense, the markets provide wide area for company to penetrate into (by adding new products to its existing product line) and there is the need for organization to decentralize.
2. Regulation of the government – If the government lays down strict policies and

procedures to be necessarily followed by the business concerns, the managers cannot take
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the risk of delegating the decision-making power in such cases to the people at lower levels, for fear of being penalized for violating the rules. The tendency to decentralize in such a case is lessened.
3. Market features – If the firms are operating in a market where homogeneous products are

produced by all the firms, the power to make decisions can be decentralized to lower level managers.
4. Bargaining with trade unions – If the trade unions are prepared to bargain with lower

level managers for their rights, the decision-making power can be decentralized while if the trade unions wish to bargain only with the top management, the organization tends be more centralized.
5. Tax laws – The tax laws operating in a country have a vital impact on the working of the

company. All decisions related to activities where their tax implications have to be taken into account should be made by the top managers only. The organization thus, tends to be centralized. Internal factors affecting decentralization – The factors internal to the working of an organization which affect decentralization are as follows:

1. Size of the company – As the size of the company increases, it may not be possible for
the managers to take decisions related to the entire organization single-handedly. The decisions would not only be slow but also costly in terms of time spent by managers.

2. Cost control – Decision-making areas where huge amount of funds are involved, for
example, the decision to buy a plant or a machine, are normally handed by top executives. Conversely, where the financial outlay involved is not too large, the decisions can be taken at lower levels.

3. Philosophy of management – Management philosophy refers to management’s desire to
centralize or decentralize authority. Some managers are interested in retraining the power and authority to make decisions and, therefore, believe in centralization of authority.

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4. History of the enterprise – Enterprises which have always been working as a centralized
organization normally continue to do so in future also. The past precedents continue to be followed in future also and cannot be easily changed unless a strong desire or an outside influence to do so is created within or outside the organization.

5. Functional areas – A certain degree of centralization or decentralization, though is
essential in every functional area, some areas like finance and personnel tend to be more centralized while others such as production and sales tend to be decentralized.

6. Ability of subordinates – Top managers of organizations where lower level managers are
inspiring and innovative would be willing to let the decision-making power be vested in the hands of lower level managers. There is a greater tendency for decentralization in such enterprises.

7. Growth rate of an enterprise – Top managers of an enterprise which is growing in terms
of financial and non-financial resources are constantly engaged in dealing with important and strategic organizational matters. Thus, there is a greater tendency for decentralization. Advantages of decentralization Decentralization offers many advantages to an enterprise. Some of these are as follows:
1. Reduction in the burden of top managers – Managers, who look after both the strategic

and routine matters, often become so involved in handling routine problems that they tend to lose sight of the future of the organization. The time that they should spend on strategic planning is not often spent. This results in sub-optimal utilization of scarce resources.
2. Development of subordinates – One often learns through mistakes. If the top executives

do not delegate authority to their subordinates for the fear that the subordinates shall make mistakes, they would never be able to provide an environment for development of potential managers.

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3. Faster decisions – In a decentralized set up, the individuals do not have to approach the

higher authorities every time they face a problem. Since they are closer to the problem area, they are in a better position to make decisions related to the given problem. The decisions made are, thus, faster and quicker.
4. Promotes diversification – If the top managers retain authority to make decisions for the

entire organization, they will be able to look after limited line of products only. Decentralization enables them to look into potential areas of market so that they can diversify their existing line of products into new markets as also add new products to the existing line of products.
5. Promotes motivation – Rather than providing financial rewards to motivate subordinates

to improve their performance, allowing them to make decisions on their own in their respective areas of specialization would serve as a better motivational force to put them into action. Thus, decentralization motivates managers to promote the efficiency of workers which is reflected in higher production and sales.
6. Flexibility - A decentralized organization is more flexible as the managers at different

levels can more conveniently change their policies according to the change in environment.

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Disadvantages of Decentralization Decentralization suffers from the following drawbacks:
1. Coordination – Higher degree of decentralization makes it difficult for top managers to

coordinate the overall organizational activities. 2. Control – Difficulty in maintaining coordination will also make it difficult for top managers to exercise control over different organizational activities. 3. Costly – Though useful, it might prove to be expensive since each department handles its activities in its own way. There can be duplication of efforts in the organization.
4. Adaptability – In case of a fast changing environment, as is prevalent these days, unless

the strategic decisions are centralized, different units would react to changes differently and the working of organization would go haywire.
5. Lack of uniformity – A decentralized organization normally lacks the advantage of

uniform policies being followed by all the organizational units. The policies are more uniformly followed in a centralized organization (as the control is centered at a single point). Marketing: There are several definitions of marketing. The better definitions are focused upon customer attention and satisfaction of customer needs. The followings are some of the corresponding definitions: According to Philip Kotler, (2000). “Marketing is a social process by which individuals and groups obtain what they need and went through creating and exchanging products and value with others.” According to CIM, (2004), Marketing is defined as: “the management process of identifying, anticipating and satisfying the customer’s needs and wants at a profit”. Marketing Orientations The marketing management philosophies

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Marketing management can be described as carrying out the tasks that achieve desired exchanges, between the corporation, and its customers. There are a number of different philosophies that guide a marketing effort. These include:  Product Orientation  Production orientation  Sales orientation  Marketing orientation  Societal marketing orientation Importance of the marketing orientation a. According to the Customer Service Institute, it costs five times as much to acquire a new customer than it does to service an existing one (CIM,2005). b. Customers tell twice as many people about a bad experience over a good one. c. According to the American Marketing Association (AMA), for an average company, 65% of its business comes from its presently satisfied customers.

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11. (a) International Management The modern extent of telecommunications and case in travel has made the world into one global community. This means that the world is getting smaller and each part of the world is getting closer to the other. Specially, since World war two, people technology, capital goods and services are crossing international borders like a daily routine. This has given rise to the pursuit of organizational objectives in an international setting transcending the boundaries of nationalism and cultural groups. International management in a true international setting involves management of multi-national corporations. It is an aspect of management which involves conducting business and industrial operations in foreign countries and is affected by cultural and national influences. The true multinationals involves more than the movements of investment capital or export of goods, and it involves a free flow of capital, technology, goods and services, information and managerial talent. In addition to import and export of goods and services, the international business transactions may be conducted in any of the following ways:
(a) Licensing agreements. In this type of agreement, a company in a host country may enter

into a binding agreement with a particular organization by which the host country organization will produce and sell products under licensing granted by the organization of the home country. (b) Management contracts. Management contracts involve simply providing managerial talent to the operating foreign companies.
(c) Turn-key projects. This means that an organization provides all services to a foreign

country to start a project from the very beginning to the operational level. This involves designing, building, operating and training personnel to take over the project.
(d) Joint ventures. This involves collaborations with local partners or the government of

foreign country in order to establish operations. This means sharing of management and manufacturing capabilities and expertise with the foreign company. This also means sharing of risks as well as profits.

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(e) Foreign subsidiaries. These are wholly owned branches of a parent company operating in

foreign countries. In general, a multi-national corporation (MNC) has been defined as: “An internationally integrated production system over which equity based control is exercised by a parent corporation that is owned and managed essentially by the nationals of the country in which it is domiciled”. In such cases the headquarters of the multinational enterprise are based in one country (known as home country or parent country) and branches or subsidiaries in one or more countries (called host countries) in such a manner that the policies are formulated at the headquarters while the operations of the subsidiaries are locally conducted in a fairly independent manner. (b) International Marketing Introduction: Successive Governments have stressed the necessity for expanding exports and the need for small firms as well as medium-sized firms to enter the export field. Sixty per cent of British exports are at present achieved by only 300 companies. The potential is therefore enormous. Objections to exporting usually follow these lines:
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Too much effort is needed to find out how to sell abroad. Risks are too great, especially if the home market is safe and produces a good return on capital.

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Lack of expert knowledge in packaging, transport, insurance etc. Exports may rely on one or two overseas markets which may be cut off by changes in legislation, e.g. licensing laws or quotas.

The marketing of goods across national boundaries often called global marketing can bring many problems to the marketing manager. A number of organizations that can assist are briefly mentioned below
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Two common mistakes made by companies who are successful in domestic-oriented business who consider exporting are:
1. They consider long-range planning on a regional rather than an individual country

basis (i.e. Europe, rather than France). This means that they tend to ignore the subtle differences which may be significant between the political and social environment of each country. 2. They are unaware of local trends which can be vital to the success of the venture. E.g. the United States Department of Commerce has specified 27 non-tariff barriers which exist in overseas trade, including special labels, packaging and safety standards.

To solve these problems the formation of a subsidiary company for selling a product is one answer. Other ways are to buy an existing company, to acquire shares in one, start a completely new company, or consider some form of joint venture with a local firm. A brief consideration of the major points to consider will include:
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Total population of country, wealth (gross domestic product per head of population). Demographic structure, rate of inflation. Assessment of risk and finance needed availability of loan capital and stability of local currency.

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Taxes, government incentives to exporters, regulations on foreign investment and transfer profits to main country.

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Data regarding local markets (state of local industry and competitors, nature of protection given to home industry).

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Existing and potential market growth. Availability of raw materials, storage facilities, climate.

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Legal constraints (pollution, patent laws), costs of labor. Political constraints, possibility of nationalization and assessment of stability of government.

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Labor availability, trade union organization.

The above factors may cause problems in marketing products abroad. However, as attitudes converge the easier it is to market multinational brands. Hence when political conflicts subside people from various countries can collaborate on multinational brands to make them successful, e.g. Marlboro, Ford and Coca-cola. It is also important to research the market carefully using, for example, the services of the International Research Institute for Social change. Their annual surveys in twelve European countries, North America, Brazil, Argentina and Japan, produce data which can be highly beneficial to companies marketing their products internationally. Advantages of global marketing: • Larger volume of production- this may justify investment in more mechanized methods of production and would increase efficiency. • Greater opportunities to counter falling orders from one area, by increases from other areas.
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Increasing marketing knowledge from contact with a wider range of markets and competitors.

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Opportunities to gain experience of design, development and production of goods and services which are not needed in home country.

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Company is better placed to compete with foreign enterprises in home market.

First steps in exporting: Assuming a manufacturer has a good product and feels this would sell abroad, the steps should be:
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1. Pick a market, preferably not one which is experiencing economic difficulties, or where

home competition is strong, or where political overtones exist. 2. Notify the regional officer of the department of trade and industry and the British overseas Trade Board, and give the Board full descriptions and samples of goods.
3. The British Overseas Trade Board will contact its representative in the market

(commercial officer of the diplomatic service) and obtain a market report, which will say what competition exists, noting any special local regulations and it prospects seem reasonable.
4. Further information may be obtained from banks, chambers of commerce and trade

associations. Each country has its own peculiarities and customs. Research is essential to see if the design, packing, name and color satisfy local requirements and the price charged leaves sufficient profit. The Export Marketing Research Scheme provides exporters with consultancy advice on planning marketing research. 5. Extra costs may include: • Costs of packing and transport to docks, shipping agent’s charges, marine and freight insurance and overseas delivery charges. •
•

Costs of setting up an export department. Customs duties, port dues, agent’s commission. Insurance of credit risk.

•

Organization which assist exporting firms Department of Trade and Industry; The regional offices each has an export officer to deal with enquiries. Their services include:
•

Provision of basic market information and suggested promising markets, and advice on market research through the Export Marketing Research Scheme;

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•

Giving information about tariffs, licensing and special duties, regulations, local customs and methods of business;

• • •

Helping businesses to solve problems of how exploit the chosen market; Providing status information on potential business contacts; Guaranteeing credit given to foreign business. Suppliers of capital goods and contractors for large projects have to offer, in most cases, credit over a number of years. The export Credit Guarantee Department of the Department of Trade and Industry offers guarantees to the commercial banks, which can provide exporters with finance at a reasonable rate of interest.

There is also a risk that payment for goods exported may not be made by a foreign buyer. Normal insurance companies do not insure for such a risk, but the Export Credits Guarantee Department has a scheme whereby it will provide complete cover for most risks up to 85-90 per cent of the value of the goods concerned, for a period of up to 50 years. British Overseas Trade Board: This body gives directions for the development of export

activities and operates an Overseas Visitors’ Bureau, which organizes and funds the visits of overseas buyers to the United Kingdom. Confederation of British Industries: This has a permanent staff overseas that carries out similar work to the Department of Trade and Industry. A special feature is that they can arrange for the small new entrant to the export market to obtain help from a larger, well-established company in the export field, which makes its services available without charge and gives the small business the benefit of its experience.

Methods of exporting A manufacturer can sell to:

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1. A buying agent. Buying agents are based in UK and may also be known as confirming

or indent houses. They act as commission agents for overseas buyers, by whom they are remunerated by commission, and from whom they receive their orders, specifying the goods they wish the agent to purchase on their behalf. The agent obtains quotations, places orders in the principal’s name and arranges shipping.
2. Export merchant houses. Export merchant houses based in the UK may be employed.

They buy goods on their own account and sell them overseas in markets in which they have specialized knowledge and where they have warehousing and selling facilities.
3. An export agent. A manufacturer may employ an export agent based in the UK. The

agent will sell goods abroad and may act for a number of manufacturers of noncompetitive lines. The agency carries out research and promotes sales overseas and can provide a complete service to a manufacturer.
4. Import merchants. Import merchants, based overseas, purchase at a large discount and

make their profit on the resale. They may be given exclusive rights to handle a manufacturer’s products in a country or area.
5. A commission agent. Such an agent, based in the importing country, may be given sole

selling rights. This is a very popular method, but careful selection is essential in obtaining an agent and in drawing up the agency agreement.
6. Direct to overseas buyer. This method may be used for large capital projects, e.g. nuclear

reactors. All detailed arrangements in 1 – 6 above must be done by the organization’s own exporting department, unless a company of forwarding agents is used. These agents can take over when the goods leave the factory and arrange for all transport and documentation to the destination.

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REFERENCES

1. Business Administration 4th edition by Waswa Balunywa, B com, MBA 2006. Published by the Rising Sun Publishers.

2. Evered (1990) Business Principal and Management 9th edition.

3. Modern Business Administration sixth edition 1994, by Robert C. Appleby. Published by British Library cataloguing in publication data.

4. Principles of management by Dr. Neeru Vasishth; 2nd Edition: Reprint 2007, published

by: Taxmann Allied service (P.) Ltd.

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