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Unit 8 Strategies and decision-making

Read the text and be ready to speak on it.

Every company tries to gain a competitive advantage that makes the company more able to succeed on the market. The top management of a company have certain unique responsibilities. One of their key tasks is to make major decisions affecting the future of the organization. In other words, the top management should develop strategic plans. The strategic plan focuses on the long-term horizon – five or more years into the future. These strategic decisions determine where the company is going and how it will get there. For example, top managers must decide which markets to enter and which to pull out of, how expansion should be financed, whether new products will be developed within the organization or acquired by buying other companies. These and other decisions shape a company’s future.

Before doing any kind of strategic planning, the management must be sure in one thing. They must decide what is the mission and purpose of their business and find answers to the following questions: What business are we in? What customers should we serve? What kinds of products and benefits can we create for them?

How should we create the firm’s capabilities and focus its efforts? They also need to decide what their business should be in the future. Determining the company’s mission and purpose is the foundation of any planning process. Thus, mission statement of any organization is a starting point for setting realistic objectives and making strategic decisions.

Driven by the mission statement, senior managers can create a corporate plan that provides the overall direction for their business and influences the tactical and operational plans. Tactical plans are worked out by middle management. They support strategic plans’ implementation and achievement of tactical goals. They are more specific and concrete than strategic plans and take one or three years to be implemented. The objectives specific for tactical plans can be, for example, producing and marketing new models of cars in the medium-price range or increasing market share by 10% in the next five years, etc. First level management is involved in working out operational plans. Operational plans support the implementation of tactical plans and achievement of operational goals, with timeframes of below a year.

The corporate plan is closely linked to the external environment in which the organization operates and takes into consideration the strengths and weaknesses within the organization. Many organizations now work out contingency plans that can help them to prepare for dramatic change in their business environment. They will also carry out a SWOT analysis where the understanding of the external environment is related to the internal environment of the organization.

Michael Porter identified five factors affecting the competitive position of a company: rivalry among existing firms, bargaining power of buyers, bargaining power of suppliers, potential entrants, a threat of substitute products or services. He

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said that a company should take these competitive forces into account before making any decision about the best strategy for its future success.

Basing on this theory, Porter identified three main strategies: competing on prices, differentiating products and services by offering something not offered by competitors, focusing on a niche market. Later, he added diversification strategy that means increasing the range of goods and services provided by the company, and complementary goods that are sold or used with other products: videocassettes and video recorders or computer software and computer hardware.

Language focus

1.Look through the text and find words and phrases having the same meaning as the Russian words and phrases below.

(рыночная власть); власть поставщиков, позволяющая им отстаивать

2.Match word partnerships used in the text on the right with the synonymous verbs on the left.

3. Match the following definitions to the correct terms below.

1.showing the difference of the company’s products from competing products_____

2.a plan for dealing with a future event or situation that might cause problems_____

3.an advantage that makes a company more able to succeed in competing with others_____

4.a company that starts to sell goods or services on the market where they have not sold them before _____

5.something new or different that can be used instead of something else _____

6.analyzing strengths, weaknesses, opportunities and threats the company can have _____

7.a short written statement made by an organization, intended to communicate its aims to customers, employees, shareholders, etc._____

8.when a company plans what it will do in the future _____

9.a market for a product or service, perhaps an expensive or unusual one, that does not have many buyers, but that may make good profits for companies that sell it _____

10.the general conditions that might influence the business _____

11.goods sold or used with other products _____

12.power that one person or group has during discussion to get an agreement in their favour _____

13.the most important managers in an organization _____

14.managers between senior managers band junior managers

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15.competition between people, companies, organizations who are in the same business or selling similar goods or services in the same market _____

16.increasing the range of goods and services a company produces _____

4.Answer the following questions in any way you wish using the phrases below. You can use one and the same phrase more than once.

1.What does a firm often have to do if it is not successful on a market?

2.What do you do if your main competitor is doing better than you on the market?

3.What should you do if you want to implement your plans?

4.How can you find out if there will be a demand for a product you wish to develop?

5.What can you do if the demand for your products in your home market is saturated (насыщен)?

6.What should you do if you want to prepare for possible dramatic changes on the market?

7.What should you do if you want to evaluate your current position on the market and compare it with your competitors?

5.Translate the following sentences from Russian into English.

1.Высшее руководство компанией занимается стратегическим планированием. Они решают, на какие рынки компания может выйти через 5 лет, каким образом расширение компании будет финансировано, какие новые товары будут разработаны в будущем.

2.Тактические планы разрабатываются руководителями среднего звена. Эти планы более конкретны и ставят задачи, которые должны быть решены сроком от 1 до 3 лет.

3.Проводя стратегию дифференциации, компания демонстрирует отличие своих товаров и услуг от конкурирующих товаров.

4.Соперничество между существующими на рынке компаниями постоянно растёт.

5.SWOT-анализ помогает компании увеличить свои конкурентные преимущества, снизить недостатки в работе, эффективно использовать возможности для дальнейшего роста и избежать угроз со стороны конкурентов.

6.Товары, которые невозможно произвести на внутреннем рынке, можно приобрести на внешнем рынке.

7.Программное заявление определяет цели компании и пути их достижения.

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8.При разработке стратегических планов необходимо принимать во внимание угрозы со стороны товаров-заменителей, а также появление компаний-новичков на рынке.

9.Сосредоточиться на рынке-нише очень полезно для небольших компаний, так как в этом случае они не представляют собой угрозу для рыночных лидеров.

10.Если спрос на товары снижается, компании следует подумать о разработке стратегии дифференциации, т.е. об увеличении ассортимента товаров, о создании новых производственных линий.

11.Наша компания тесно связана с поставщиками. Мы работаем с ними уже несколько лет.

12.Чтобы сохранить своё конкурентное положение на рынке и успешно справляться с возможными проблемами в будущем, компании необходимо разработать план, предусматривающий непредвиденные обстоятельства.

6.Mission statement is a formal statement in an organization’s strategic plan that describes the overall purpose of the organization and what the organization intends to achieve in terms of its customers, products, and resources.

This is an extract from a presentation about UPS (United Parcel Service) company. Match the sentences 1-6 with the sentences a-f that should follow them. What do you think about the mission of the UPS?

1.We have invested a great deal in making our company the most technologically advanced in its sector.

2.We believe in treating every customer with care and respect.

3.We have a reputation for operating fair employment policies.

4.We are committed to taking the best possible care of the environment.

5.We are well known for contributing to charitable and educational community projects.

6.We are proud of being chosen as one of Fortune magazine’s ‘most respected companies’.

a)A recent survey placed UPS as the most admired mail package and freight delivery company in the world, and Forbes magazine also voted UPS

‘Company of the year’.

b)We deliver over 3 billion packages annually, but each customer should feel that their delivery is our top priority.

c)The UPS literacy foundation has given nearly 58.5 million to support literacy programmes throughout the country.

d)Over the past ten years, we have spent more than $9 billion on information technology, and we continue to spend $1 billion every year.