Risk Due To The Availability Of Resources Construction Essay

Risk Due To The Availability Of Resources Construction Essay Risks are involved in all stage of the construction project. The construction risks will arise within the contract period and it may cause the Contractors failure to keep within the cost budget, failure to complete the work within the completion date and failure to achieve the quality requirement of work (Flanagan and Norman, 1993, p.8) ². The Contractors have the responsibilities to bear for the risks that arise during the construction period (Flanagan and Norman, 1993, p.183) ². Once the contract has been signed, the contractors have the responsibility to perform the project either the project is continue for better or for worse until the project is completed (Sayers, 1997, p.1) ³. Consequently, the Contractors cannot simply tender for a project without consider those risk that involved in the project. As a result of not recognized the risks, it may cause the Contractors to lose money or become bankrupt. The risk has the capacity of eroding profit and moving the project from a profit making into a loss-making venture. A Contractor can make a profit or loss at the end of the project is depending in how accurately the risks have been assessed. Thus, the Contractors have to consider the risk factors that involved in the project in order to make a decision on whether or not to tender the project. The tender price will be influence by the risk factors. The construction risks will cause the estimated tender sum difference with the actual cost of project. Therefore, during tendering for a project, a Contractor has to consider the risks factors that may occur during the construction stage in order to ensure they have the capability to carry out the work and making a profit margin at the end of the project. 1.2 Aim and Objectives This study aim is to understand the importance of managing the risks during tender stage. In order to achieve the aim, the following objectives are conducted to support the aim:- To determine the construction risk that may occur within the contract period that faced by the Contractors. To illustrate the consequence of the risk where the risks does not be managed at the tender stage. To identify the approach of managing the risk that faced by the Contractor. 1.3 Background Risk are involved in the all stage of a construction project due to the construction process period are long, the process are complicated, and costly. A risk can be managed, reduced, transferred, shared, and accepted, but it cannot be ignored (Dallas, 2008, p. 5) ¹. Moreover, the risk has an impact over the construction objectives which in term of cost, time, quality, safety and health and environmental (Flanagan and Norman, 1993, p.8) ². Thus, before the Contractors are going to tender for a project, they have to identified all the risk that face by him to measure the impact that against by him. In order to dealing with the risks, a risk management processes are recognized as a systems process which assists the Contractors to manage the construction risks. Risk management is one of the systematic ways to manage the risk or unwanted event which influence the outcome of the project. According to Smith et al. (2006, p.2)à ¢Ã‚ Ã‚ ´, undertaken a risk management process in tender s tage can assist the Contractors to minimize the impact of the risk and making a better decision over the risk. By conducted the risk management process, it can assist the Contractors have the better understanding over the risks or problem. The risks will involve in each of the tender stage. During the estimating process, the risks factors will influence the tender price. The estimators have to ensure the risks are well pricing into the tender price. Consequently, the risk management process has to be conducted in the tender stage due to the risk management process can assist to make right decision over project. 1.4 Scope of study This study is focus on how the Malaysian private Contractor managing the risk before signed the contract for a project. The area of research is focus on Malaysian private Contractor. The scopes of this study including finding out the different type of the construction risk which may occur within the contract period and the consequence of those risk against the Contractor. A suitable approach of managing the construction must be provided in order to identify, analyze and response those risks. The questionnaire survey will conducted in order to enhance this study. This study will only focus on the group of the Malaysian private Contractor. 1.5 Research Methodology In this research, the main research methods used to complete this research are the literature review and data collection through the questionnaire survey which among the Malaysian private Contractors. The literature reviews in this research are conducted to support the objectives of this study. The resources of the literature review are from the books, journal articles, and internet sources. In order to achieve the objectives of this study, the literature review has focusing on the potential construction risk that encountered by the private Contractor, the effect to the construction against the Contractor and the approach of managing the construction risk that are required to carry out by the Contractor. Furthermore, the questionnaire survey will conducted among Malaysian private Contractor to enhance this study and achieve the objectives of this study. The questionnaire survey sent to the Contractor through either by hand, email and post. The main purpose of conduct the questionnaire survey is to obtain the information from the focusing groups of Malaysian private Contractors in order to investigate the construction risk that faced by them, the effect of construction risk among them and how the Contractor manage the construction risk. After the collected data from the questionnaire survey has been collected, then the collected data will be summarizing, arranging and analyzing by using the SPSS software. Moreover, a clear interpretation of the result will be conducted to support this study. 1.6 Structure of the Dissertation This study contains of 5 chapters and each of the chapter had summarizing as follows: Chapter 1: Introduction This chapter highlights the main reason that the Contractors have to carry out risk management during the tender stage. The aim and objectives and background of this study has determined in this chapter. Chapter 2: Literature Review This chapter discussed on the potential risk that encountered by the Contractor, the consequence of construction risk against the Contractor, importance of managed risk in tender stage, and the approach of manage the risk in tender stage and construction stage. Chapter 3: Research Methodology and Questionnaire Structuring This chapter identified the method and material that used in this study. The research method of this study will be well interpreted in this chapter. Chapter 4: Data Analysis This chapter summarized, arranged and analyzed the collected data and conduct a clearly interpretation on the result of the collected data. Chapter 5: Conclusion This chapter summarized the outline and the finding of this study, and recommend on this study for future research. ` 1.7 Reference Dallas, M. F. 2006. Value and risk management: A guide to best practice. UK: Blackwell. p.5. Flanagan, R and Norman, G. 1993. Risk management and construction. London: Blackwell. p.8, 183. Sayers, P. 1997. Competitive tendering, management and reality: Achieving value for money. London: E Fn Spon. p.1. Smith, N.J., Merna, T. and Joling, P. 1999. Managing risk in construction project. Oxford: Blackwell Science. p.2. CHAPTER 2: LITERATURE REVIEW 2.1 Overview of various type of risks in construction project that faced by Contractors This chapter discussed on the potential risk that may occur during the contract period. The definition of risk and the various types of the risks and its consequence over the project will be discussed on this chapter. 2.1.1 Definition of risks Risks that involved in the construction project can be described as the probability of occur something or occur some unwanted or unfavorable event which that will has an impact over the project (Mostata Ghadak Zadeh, 2010, p.9). Flanagan and Norman (1993, p.8) emphasized that, risk is an uncertain event the may cause a construction project failure to keep within the objective of project which in term of cost, time, quality, safety and environmental sustainability. Moreover, Begum Ongel (2009) stated that, risks can be described as the unforeseen event that might be occur in the future and may have negative consequences over the project objectives. The construction risk can be described as an uncertainty or probability of occurrence of something that has an impact over the project outcome as shown as Figure 2.1. Figure 2.1: The Concept of the risk (Source: Merna and A-Thani, 2008, p.8) Merna and A-Thani (2008, p.13) suggested that, the risk can be described into 3 categorized:- Known risk- The known risk can be described as the risks that happen every day on construction industry. Basically, the known risk will be the variation work and the inflation in construction resource costs. Those known risk will cause the additional work needed to be carry out and delay for the work. If the known risk has happen in the construction stage, then those work will usually covered by the contingency sum of the contract. Known unknowns- The known unknowns are the risk event that can be predicted or foreseen. The effect of the known unknowns and their probability of occurrence will be easily to be known. Unknown unknowns- The unknown unknowns are the risk that cannot easily be predicted. Generally, those events that cannot be easily foreseen are the force majeure event. 2.1.2 Type of risk in tender stage According to Odeyinka et al (2006), the risk sources in the construction industry that are occur during the tender stage are including the estimating risks, design risks, tender evaluation risks and the competitive tendering risks. Moreover, Cooke and Williams (2009, p.123) mentioned that, the risk factors that require to consider by the Contractors during the tender stage are including the tender risks, quantity risks, subcontractors risks, design risks, programme schedule risks, method risks, health and safety risks, and documentation risks. 2.1.2.1 Design risks Poor design can cause the Contractors bid be influenced and affecting the ability to win the project. The Contractors have the responsibility for the quality of work. 2.1.2.2 Estimating error risks During the preparation of the tender price, the estimators may estimate wrongly or make some mistake on quantities of the work. Thus, this will influence the accuracy of the tender price. According to Cooke and Williams (2009, p.123), the Contractors are require to assess the accuracy of the quantities in the bills of quantities. In case of the quantity error is done in the bills, the Contractors have to accept the error and bear for the losses after the contract award to the Contractors. 2.1.2.3 Competitive tendering risks In traditional tender process, the tender will awarded by the lowest bidder. Many of the Contractors will try to lower down the tender price in order to winning the bid. In this case, the Contractors may not have sufficient resource to complete or carry out the work. Consequently, lose the profit margin. 2.1.2.4 Documentation risks According to Cooke and Williams (2009, p.125), clarity of tender documentation is important. The Contractors requires referring the tender documentation such as the drawing and specification carefully in order to price accurately. Cooke and Williams (2009, p.125) stated that, the Contractors require to refer to the tender documentation very carefully in order to assess implication of onerous contract term, clauses deleted from standard contracts, high levels of liquidated damages, unrealistic contract period, possible innovation of the design and contract bonds and guarantees required. 2.1.2.5 Method risks The Contractors choice of construction method is one of the important decisions during the tender stage. Cooke and Williams (2009, p.125) mentioned that, the Contractors choice of construction method can win the contract but it may cause risks over the project. One of the example is that the type of the earthwork support required may be require more expensive earthwork support to support the foundation in case of week site condition. 2.1.2.6 Subcontractors risks 2.1.2.7 Health and safety risks 2.1.3 Type of risks in construction stage The construction risks are the risks that occur during the construction stage. According to Nafisah Binti Abdul Rahiman (2006, p.24), the construction risks are the unforeseen or unwanted events that occur within the construction period. Flanagan and Norman (1993, p.) stated that, the risk are involved in the construction project due to the construction activities process are taken long duration, complicated, influenced by environment factor and costly. According to Boussabaine and Richard (2004, p.180), the construction risks has an affect the over the cost, time and work quality of the project. During the construction stage, the Contractors have the responsibility to bear for the risk. Thus, the Contractors are requiring focusing on the construction risk that may face by them in order to reduce the effect against them. Boussabaine and Richard (2004, pp.181-184) mentioned that, the construction risks that face by the Contractors during the construction period are including the avail ability of resources risks, industrial disruption risks, productivity of labour and plant and machinery risks, safety and health risks, performance of subcontractor risks, poor workmanship risks, schedule programme accuracy risks, capability of the contractors risks, materials or components risks, site condition risks, unfavorable weather conditions risks, quantities of work risks, price inflation risks and etc. 2.1.3.1 Risk due to the availability of resources The availability of material, labour and plant and machinery will influence the construction cost be increased. The price of the material, labour and plant and machinery are expensive in the condition of those resources are not readily available in the area of the construction site. It may require the extra transportation fees to deliver the material and plant and machinery to the construction site. Moreover, when the certain labour is not readily available in the area of the construction site, it may require employing them from an area where such labour is available. 2.1.3.2 Risk due to industrial disruption The industrial disruption risk may occur due to the strike action among the labour. The strike event may occur when the labour is unwilling to follow any matter that instruct by the Contractor. In this case, the construction work will be delayed and cannot be completed within the completed date. Consequently, the Contractors suffer the losses of paying for the cost to settle down the strike event and pay the liquidated damage over the delayed work. 2.1.3.3 Risk due to the productivity of labour and plant and machinery The productivity of labour and plant and machinery is important due to it may caused the work be delayed. The Contractors can provide the training for the labour to increase labours productivity and provide adequate maintenance for the plant and machinery to ensure the plant and machinery operate efficiently. 2.1.3.4 Risk due to safety and health The safety and health risk will occur due to the impact of hazards which involved in construction site. Risk of accidents is occurring during the construction period and that cause the personal injury. The Contractors are required to compensate for the labour in case of the labour are injured during carry out the construction work. The Contractor has the responsibility to ensure the construction site is safety. Consequently, the Contractors have to comply with the Occupational Safety and Health Act in order to reduce the accident risk during the construction stage. 2.1.3.5 Risk due to the subcontractors coordination In case of the subcontractors are fail to coordinate the work plan correctly, it can lead to work be delayed and cost be overrun. Moreover, the specialist subcontractors work can account a high percentage of the overall capital cost. Thereby, the effect of the specialist subcontractors are fail to coordinate the work on the overall project is of a greater magnitude. 2.1.3.6 Risk due to poor workmanship The poor workmanship can cause the quality of construction work is not meet with the standard requirement. A Contractor has the responsibilities to ensure the construction work is meet and according to the contract requirement. In case of the quality of work are not meet with the standard requirement, the Contractors may require to reconstruct the work and to rectify the work by his own cost. 2.1.3.7 Risk due to project programme accuracy Sometime the process of the actual work will not keep within project schedule and plan. Failure on scheduling the time, unforeseen delay in material delivery, plant and labour availability will lead to cost overruns and work be delayed. 2.1.3.8 Risk due to capability of the contractors The Contractors have to ensure he has sufficient capital and resource in order to carry out the work. The Contractors must consider the size of the project in order to ensure that he has sufficient resource to carry out the work of the project. Besides, the Contractor must ensure that the type of project is the work that he has the experience and he has performed the similar type of work in the past. This is to ensure the Contractors can carry out the project successfully. 2.1.3.9 Risk due to the materials or components The Contractors have the responsibilities to ensure the works meet with the quality requirement. Failure in maintain the components of the work can lead to expensive maintenance cost. Thus, the Contractors have to ensure the quality of the material and be careful on selecting the material. 2.1.3.10 Risk due to differing site condition Sometime the actual site condition may different with the expectation condition. The type of the earthwork support may require support by an expensive foundation as the ground condition of site is weak. An investigation of the site condition should be conducted in order to reduce the differing site condition risks. 2.1.3.11 Risk due to unfavorable weather conditions Weather is an unforeseen risk during the construction period and it will cause delay of work. Moreover, the adverse weather will damage the components and element in the construction site. Thus, the Contractors should provide regular updates of weather in order to ensure the work plan can be altered due to the adverse weather condition can interrupt the work programme. 2.1.3.12 Risk due to quantities of work The Contractors has to bear for the loss due to the quantity in the bill of quantities is not accuracy. It will cause the construction cost and time overrun if the quantity work is subsequently reduce (Cooke and Williams, 2009, p.123). Moreover, the differences between the actual and planned work will lead to cost and time be overrun. 2.1.3.13 Price inflation risks The price inflation is means a persistent rise in the price of the construction resources such as the cost of material, transportation fees, cost of labour and cost of plant or machineries. The inflation on the price of construction resources is difficult to forecasting. During the recession, the price of resources may be increased and this may cause that the Contractors to losses a lot of money. 2.1.3.14 Design risks The design risks are the risks that involved in a concept design or a detailed. According to Jackson (2010, p. 313), the Contractors are responsible for the design and in those cases it is critically important that design risks are given serious review and consideration in the overall risk mitigation plan. The design risks may influence the Contractors ability to construct the project on time, within budget, and within the quality requirement. To continue with Jackson (2010, p. 314), the design risks that may faced by the Contractors are including the followings:- Poor quality and inadequate of the design drawing or specifications The information and detail of drawing and specification that needed to construct the construction works are not completed, inaccurate, or unavailable. The Contractors are require to obtain the drawing or information from the Architect, thus, delay on work be occurred. Noncompliance with the design standard The design of the project does not meet with the standard requirement, building code or the other regulations. In case of the Contractors are build according to the design the not meet with the standard requirement, building code or the other regulations, it may cause the Contractors fail to keep within the quality of the works. Changes in design standard or regulation requirement The regulatory requirement in place at the commencing of the project may change during construction stage. Variation on design The Client changes the design during the construction stage. The contractors are require extra time carry out the variation work, thus, delay on time. Inaccuracies associated with supplemental design information. The information of the soil report, environmental report and etc that provide by the Architect to the Contractors is not accurate. Latent design defects affecting Contractors warranty Defective design details that result in flawed construction after occupancy of the facility such as a roof flashing leaks because of poor design. Jackson (2010, p.314) stated that, The Contractors are require to do some background investigation about the Architect and Engineer before tender the project which in case of the Contractors not familiar with the Architect or the Engineer who designed the project. This is to ensure that the quality of works that the Architect or Engineer produces in order to reduce the design risks. 2.1.3.15 Political risks According to Jackson (2010, p.317), the political risks can be described as third-party risks which the Contractors are usually have least amount of control over it. Although the Contractors are aware that the political risks are exist, but there is no ways to accurately predict how various jurisdictions and agencies will act. Contractors are required try to anticipate the political risks that may affect the ability to fulfill the expected contract requirement before submit a bid. According to Jackson (2010, p.317), the political that involved in the construction project are including the followings:- Changes in law Change in sales tax or other tax structures that increase in sales or use taxes will impact material costs Constraints on the accessibility and employment of expatriate staff 2.1.3.16 Environmental risks Environmental risk is an important issue that the Contractors are requires to concerns due to it may influence the cost and time of the construction project. The material and chemicals that used at the construction project may cause the pollution over the surrounding area. Moreover, the environmental risks are the risks that the Contractors have less control over it. According to Jackson (2010, p. 319), the environmental issues that can influence Contractors budget and schedule planning which are including the followings:- Environmental permits and approvals The environmental permits and approval are cannot be getting on the planned time due to the environmental permits and approvals are delayed or require more time to negotiate than expected. Hazardous materials or site contamination The unknown hazardous materials or site contaminates be found after the construction work has commenced. Archeological findings The unknown artifacts are founded or an unknown burial site or cemetery is unearthed during the construction period, that may requiring the construction work to stop. Endangered species The project has known or unknown endangered species sightings that will require protection and special care during construction. Wetlands, coastal protection or flood plain issues Wetlands, coastlines or flood plain are require the special protection, thus can influence the construction approach. According to Osborn and Schreyer (1988, p.1), before the construction project commencing, the Contractors are require to appreciate the potential for additional costs due to the existence of hazardous substances and other environment concerns. 2.1.3.17 Financial risks According to Jackson (2010, p.317), the financial risks can be described as the risks that associated with the Contractors own financial position. The Contractors are required to maintain sufficient working during project execution, thus the financial standing of the Contractors are require be good. The financing risks that faced by the Contractors are including the followings:- Contractors cash flow In case of the Contractors have insufficient of the credit can cause delays in supplying the material, late payment to subcontractor. It may cause the construction work be delayed and the subcontractor not willing to carry out the work. Interest rate increases In case of the borrowing money from bank by the Contractors to fund the project, once the interest rate is increased it would have an adverse effect on the project. Insufficient Client funds If the Clients is unable to make payment on time to the Contractors, then it will causing the Contractors do not have sufficient cash flow to fund the project. Subcontractor or supplier bankruptcy In case of the bankruptcy of the subcontractors or suppliers, the Contractors are requiring to hire another subcontractors or suppliers to take over the job. Thus, it may cause delays, cost overruns for the project. 2.2 The importance of managing risk in tender stage This chapter discussed the various reasons for the Contractor to managing the risk in the early stage of the project which at the tender stage and the consequences of the risks that against the Contractors. 2.2.1 Why should the risk be managed at the tender stage According to Boyce (2003, p.6), during the tender stage, a risk management should be undertaken in order to look at the potential problem on preparing an attractive bid on time, to winning the project, and to consider whether or not the project can be completed successfully. By providing the risk management process during the tender stage, the potential risk and problem can be identified and forecasted. Thus, a mitigation risk plan can be conducted to avoid and reduce arise during the construction stage. A risk management process has to provide at the tender stage which when there is still has a possibility for fundamental changes of any decision (Anna Klemetti, 2006, p.24). To tender for a contract will costs a lot of money and therefore the Contractors cannot simply accept to bid a contract without consider of any risk factors and profit potential in the project (Cooke and Williams, 2004). Boussabaine and Richard (2004, p. 181) emphasized that, the Contractors has to bears and take on the risk that occur during the construction stage. Thus, this is important for the Contractors to aware of all the construction risks that faced by him before the contract is being signed. The main objectives of the construction project will likely to be influence by the construction risk (Smith et al., 2006, p.2). The risks will cause the Contractors failure to keep within the cost budget, failure to complete the work within the completion date and failure to achieve the quality requirement of work (Flanagan and Norman, 1993, p.8).As a result of this, the Contractors need to recognize the risk involved in the project and manage the risks at tender stage in order to ensure the objectives of the project are achieved over the contract period. Moreover, the Contractors have to make the right decision on whether or not to tender the project. Once the contract was signed, the Contractors have to bear for all risk that involved the project until the project is completed (Sayers, 1997, p.1). The Contractors will face two risks during they tender for the project which are the risk of losing the project and the risk of winning the project (Boyce, 2003, p.9). Once the Contractors have winning the project, the Contractors have started to perform the contract. In case of awarded a project that is difficult to be completed or managed, it may cause the Contractors suffer for losing their financial or reputation (Boyce, 2003, p.9). According to Smith et al. (2006, p.94), the risk management process can help the Contractors to concern on the decision of to or not to bid for the project. Consequently, the decision that make by the Contractors are very important due to the risks may cause the Contractors to lose money or become bankrupt. During preparation of the tender price, the risk will influence the accuracy of the tender sum. The estimating risk can cause the Contractors to lose money or become bankrupt in case of the tender price was pricing wrong. The risk has the capacity of eroding profit and moving the project from a profit making into a loss-making venture. A Contractor can make a profit or loss at the end of the project is depending in how accurately the risks have been assessed. Smith et al. (2006, p.2) mentioned that, the risk management provides a better reviewing, understood, consideration over the project issues. To continues with Smith et al. (2006, p.94), a lack of understanding the risk may cause the Contractors pricing the tender price wrongly and as a result of this the additional cost will required to pay by the Contractors. Smith et al. (2006, p.193) suggested that, the risk management is used in the project due to it provide the following benefits:- To assist Contractors to aware of the risk that involved in the project and impact of the risks. Thus, the Contractors can focus on minimizing the risk or try to allocate risks to the other parties. To assist the Contractors to provide better decision over the potential risks or problem. To provides a better understanding of the risks or problem. To provide a better understanding over the project detail. This may assists Contractors to provide the realistic plan in term of programme schedule and cost estimate. To gives knowledge of the risk in projects. This may allow assessment of contingencies that actually reflect the risks and also tend to discourage the acceptance of financially unsound project. To provide the better management over the major risks that involved in the project. According to Burtonshaw-Gunn (2009, p.21), the risk management can assist the Contractor on the following:- To plan and taken necessary action to reduce the risk before the risk has been occur and assist the Co

Role of Managers in Company Management

STUDY GUIDE FOR THE Management Role of Managers in Company Management for BMCF TM study – course M_RMCM Role of Managers in Company Management Karel Havlicek Ing. Karel Havlicek, PhD. , MBA Management – Role of Managers in Company Management  © Karel Havlicek, 2011 Management – Role of Managers in Company Management Contents : 1. Role of management in hypercompetitive environment 1. 1 Owners and managerial strategy 1. 2 Managerial strategies and managerial planning 1. 3 Involved persons – Stakeholders 1. 4 Key terms 1. 5 Test questions 1. 6 Recommended literature 2.Role of management within marketing management 2. 1 Marketing management 2. 2 Marketing policy 2. 3 Marketing researches 2. 4 Marketing planning 2. 5 Key terms 2. 6 Test questions 2. 7 Recommended literature 3. Role of management within sales management 3. 1 Sales management 3. 2 Sales planning 3. 3 Management of forecasts 3. 4 Trade receivables management 3. 5. Customers communication managem ent 3. 6 Key terms 3. 7 Test questions 3. 8 Recommended literature 4. Role of management within financial management 1. Financial management 2. Financial planning 3. Controlling 4.Management of relations with banks 5. Costing 4. 6 Key terms 4. 7 Test questions 4. 8 Recommended literature 5. Role of management within quality and innovation management 5. 1 Quality management 5. 2 QMS models 5. 3 TQM models 5. 4. Balanced Score Card 5. 5 Innovation management 5. 6 Key terms 5. 7 Test questions 5. 8 Recommended literature 6. Role of management within team building 6. 1 Managerial team building 6. 2 Recruitment of managers 6. 3 Implementation of managers in teams 6. 4 Motivation and education 6. 5 Establishment of organizational designs 6. 6 Key terms 6. 7 Test questions . 8 Recommended literature 1. Role of management in hypercompetitive environment 1. 1 Owners and managerial strategy 1. 2 Managerial strategy and planning 1. 3 Stakeholders 1. 4 Key terms 1. 5 Test questions 1. 6 Recomme nded literature 1. 1 Owners and managerial strategy The term strategy has been frequently used in various contexts, which often leads to many misunderstandings and confusions. It originates from Greek – we can translate it as the art of a leader, general. Within business terminology it used to mean the ability to make decisions on the basis of high expertise and professionalism.However, there is another term with the same root used in English – â€Å"stratagem†. The term is generally translated as an act performed by company management within its top managerial activities. By the term strategy we mean certain scheme (process) that outlines how to achieve the set objectives under given conditions. It is a summary of steps and activities to be adopted â€Å"being aware† of partial lack of knowledge of all the future circumstance, conditions and connections, where not every possible alternative is identified, and individual advantages and disadvantages can't be determined for the purpose of future decision making.The objective is to establish adequate coordination of all the company's activities, and create unified complex of its perspectives. The strategy in small or medium enterprise should be defined in a short or mid-term horizon, not for more than 5 years ahead. Such horizon should be sufficient for medium sized enterprises. An enterprise of this size should anticipate a flexible change required by general trends. Flexibility is one of the major competitive advantages of small and medium enterprises compared to multinationals and large corporations. Thus it is not necessary to set up long term strategies, as their continuous changes are likely.The maturity of mid- and long term investment loans can be used for orientation with regards to the period of compiled strategy. In normal practice we discern owners' and managerial strategic aspects. Owners strategy is basically outlined by owners (shareholders, partners), and has a global character. The owners determine what is their mid- and long term objective. These can be for example: – financial requirements (ROE, EVA, profit, dividend, available CF etc. ), – marketing and sales aspects (market position and share, turnover etc. ), – strategic objectives (market value of the company, synergic effects etc. . Managerial strategy is based on the owners strategy, developing concrete strategic plans in order to achieve the owners' objectives. This strategy is prepared by the company management at the level of sales, marketing, financial, production, human resources or other directors. strategic objectives and strategies are identified on the basis of analyses, frequently in cooperation between the top management and owners. As mentioned before, the company management is responsible for achievement of strategic objectives, represented by the executive or general director.Controlling body can be an advisory or supervisory board of the company, or bo ard of directors, provided the board is not the management at the same time. This always depends on particular model and organizational design (structure) of the company. 1. 2 Managerial strategies and managerial planning The following steps are usually understood under the term â€Å"company strategy†: a) Description of current status by SWOT analysis. b) Determination of target status in a mid-term horizon. c) Outline of strategic objectives. d) Strategy of achievement of these objectives. ) Establishment of control mechanisms of the achievement. Strategies and strategic objectives are above all the activities and departments of the company. They are the starting point of plans and concepts of individual departments, divisions etc. The objectives of financial, sales, marketing, human resources and production have to be based on global strategy, when formulating partial plans and goals, and the short term objectives of these departments have to be modified in accordance with overall strategic objectives, which is an essential precondition of their achievement.This process is illustrated in the Figure 1-1. Figure 1-1 Illustration of the company strategy and its links to the plans of individual departments Individual strategic issues are not definitive, heir implementation in the company depends on its orientation, size, organizational design etc. It is obvious there will be no production strategy implemented in a trading company etc. Another strategies and consequent plans we may come across are innovation, quality, logistic and others. It is possible to combine certain strategies as well.Typical example for the small and medium enterprises is the amalgamation of marketing and sales strategy into one sales and marketing plan. Human resources plan in SMEs is sometimes substituted with a simpler motivation plan. Marketing strategy Marketing strategy is the basis for articulation of all the company's objectives. We may claim a successfully implemented sale s and marketing strategy is decisive for the enterprise's efficiency. Basis is the marketing mix, from which we derive the following marketing strategies: -product (product mix, life cycles, brand strategies†¦) -price (costing, pricing strategies) distribution (distribution channels mix, approach to the management of distribution conflicts) -communication (strategy of setting up internal and external communication mixes) The strategy consists of analytical and implementation parts. The analytical part describes current status, or history in all the strategic issues defined above, and together with the marketing research they are the basis for identification of strength and weaknesses, opportunities and threats – so-called SWOT analysis. The principles of marketing management of the company are defined in the marketing strategy and its implementation part.Fundamental is the marketing plan, as it includes marketing objectives, strategy of achievement and control mechanisms . Sales strategy The sales strategy is built on the marketing plan, and SWOT analysis. History of sales is described in the analytical part in the following breakdown: – product groups or individual products – customer segments, or individual customers – foreign or local territories The implementation part describes principles of sales management, and with regards to the above mentioned breakdown it includes the sales objectives to be developed further into detailed sales plans.Financial strategy It is created in the context of sales plan, with regards to the marketing research, SWOT analysis, and marketing and sales objectives. The analytical part includes history and updated summary f financial results and indicators in the structure relevant to the size and orientation of the company, and financial requirements of the owners. The implementation part consists of an overview of the required financial objectives in the horizon of several years. The achievement o f objectives is defined in the financial management policy, which is the basis for development of financial plans and budgets.The financial plan consists of balance sheet, profit and loss account, and cashflow statement. Annual budget is the basis of company's operating management. The financial strategy is a result of marketing and sales strategy. The marketing and sales plan has to come before the financial plan. This means the marketing and sales information – to who, for what price, where, in what form and with what marketing cost – has to precede the budget. Sometimes wrongly used reverse process tends to unrealistic forecasts, and may cause existential problems to the enterprise. Financial director is responsible for the financial strategy.In order to be able to prepare it credibly, the director needs timely and correct information from the marketing and sales department, at minimum in the form of sales plan. Production strategy Similarly to the previous cases th e production strategy includes analytical and implementation parts. The analytical part describes history of production, namely with regards to capacities, technologies, processes and individual sections, productivity and relation to the fulfillment of sales results. The implementation part describes how many products, in what quality ad structure, time and efficiency will be produced in the strategy's horizon.The production strategy defines overall management of the production, sometimes also the management of procurement and technologies. Its results are local production plans – basis for dispatch plans (can be included logistic or warehousing plans). The production strategy in smaller companies is usually complemented with procurement policy and investment strategy related to new technologies. The marketing and sales, and financial plans have to come before the production plan. The director of production is responsible for the production plan and strategy.This procedure ha s to be emphasized once again! In many enterprises so-called manufacturing approach survives: â€Å"The production has produced and now it's up to you – the salesman – to sell it! † Production directors and managers as the driving forces in companies are a mistake. It is not possible for the production departments to decide on the product range, price and quality. It is the customer who decides, and his decision is mediated in the company through marketing and sales department. As an example we can take the transformation of so-called Eastern bloc.High demand in former East-European countries in early nineties that often exceeded the supply of both traders and manufacturers, was a unique phenomenon, result of the transition towards market environment. Such situation is really unlikely in future. Logical consequence of company management was tremendous pressure of production and financial departments on sales – priority was HOW to produce and HOW to secure funds, WHERE to place the product or service was a secondary concern. The sales (actual sales, not the trading) were often simpler than the very manufacturing concept.Incoming multinationals and consequent growth of competition in general, stricter legislation, more cautious banks, higher pressure on quality and saturation of the market – these are the basic attributes that change the view of still frequent process: manufacture – finance – sales – marketing. The supply today exceeds the demand in most cases. Overproduction and surplus products come as a result. The enterprise capable of assessing market development and placing its products in variants, products that are sold, is more competitive and successful.The priority now is WHERE to place the product, WHAT price is the customer and the consumer willing to accept, WHAT quality is expected by the customer and the consumer, WHAT distribution channel is optimal for customers, WHAT means of communicatio n will be used to offer the product, and only then: HOW and FOR HOW MUCH to produce the required product (to ensure profit at the end of the day). The Figure 1-2 illustrates trends of supply – demand relations in eastern Europe. It means in most cases it is the customer who decides on quality, design, parameters, price and placing of the product, not the manufacturer.The manufacturing approach is thus replaced with customer-oriented, sales/marketing approach. There is gradual transfer from production-oriented marketing towards the modern marketing philosophy of customer relationship management. This process was typical for the whole period of nineteen nineties, and due to the dynamic development of market environment, relations and competition it was very intensive. Figure 1-2 The trends of supply – demand relations in Eastern Europe in 90s Human resources strategy Human resources strategy has an analytical-historic part, and implementation part, too.It consists of hum an resources policy, followed by the plan of human resources management, so-called human resources plan. The plan describes in detail recruitment system, inclusion of employees in teams, creation of organizational designs, training and motivation of the staff. Personnel (in larger companies human resources) director is responsible for its preparation. In smaller companies, where there is no post of personnel director created, the human resources strategy falls within the executive director's responsibility.In some medium marketing-oriented companies the bearer of personnel policy can be the marketing and sales director, who includes in his marketing plan the area of so-called internal marketing. Internal marketing in this case is a philosophy that treats the employees as customers – the main point being communication with the staff. They are informed of what is going on, why it is going on and what is required from them in order to ensure efficiency. In smaller companies the human resources plan is often substituted with motivation plan. The importance and sequence of managerial strategiesThere is a change of priorities and sequences of managerial going on presently. The effects of overproduction and surplus products lead to the necessity of considering the market information first – where to sell the product, under what conditions and quality. This means the marketing and sales plan is a cornerstone of further strategic planning, i. e. human resources, financial, production, quality, logistics, innovations, procurement etc. It is important to understand the planning in relation with the annual budget, as illustrated in the Figure 1-3 Figure 1-3 Strategic planning in small and medium enterprises related to annual budget . 3 Stakeholders One of the definitions of modern relations marketing talks about the tool of marketing philosophy of creation and distribution of values for targeted and identified markets – customers. Therefore correct id entification of the customer, understanding the desires, values expected from us (the enterprise), for which he is willing to pay, are the basis of any marketing approach, and the starting point for the treatment of any marketing case. Basically we recognize two types of users of our products: – customers who buy or pay for the products and services we provide, but they do not necessarily use them (e. . purchase of gift for somebody, pet food, toys for children), – consumers who use the products ad services, but they do not necessarily buy them (husband uses aftershave from his wife, children play with toys from their parents). Another possible interpretation of the term customer is provided by P. Kotler and G. Armstrong (Marketing. Grada Publishing, Praha 2004), working with the following division: – organization whose purchasing behavior includes goods and services for the manufacture of another products to be sold, rented or provided further. These are also w holesale and retail companies.They operate in so-called industrial markets, – consumers (individuals and households) that buy goods and services for their own needs, the transactions take place in so-called consumer markets. Thus every enterprise has several different groups of customers and consumers, each of which expects different values from the relationship. We may even develop this idea further, and include another parties that neither buy nor directly use the services, still influencing the enterprise's behavior. Those interested in particular company, because they can influence or be influenced by its activities (production, sponsoring, communication etc. are called involved persons, or stakeholders. In the relation marketing theory you may come across one statement – survival of an organization depends on its effective management, and wide range of involved persons. The satisfaction of the may and often conflicting interests of involved persons is a task for e very manager within an organization. Involved persons – stakeholders, and their expectations are identified in the model shown in the Table 1-1 As seen in the table, the involved persons include several groups not to be called customers in our sense; however, on the other hand we would call the customers stakeholders.The term â€Å"stakeholders† is thus considerably wider than the term â€Å"customers†. The success and managerial skill does not mean maximum satisfaction of just a part of the stakeholders, but adequate satisfaction of everybody, if possible. The word â€Å"adequate† is used on purpose, as it is almost impossible for the reason of often conflicting interests to satisfy everybody to maximum extent. Involved persons |Expectations | |Employees |Financial remuneration, satisfaction from work, sureness | |Shareholders |Growing capital, dividends | |Suppliers |Regular and paid deliveries |Customers, consumers |Quality, value | |Government |Employ ment, legislative environment, payment of taxes | |Managers |Prestige, acknowledgment, career opportunities | |Minorities |Employment without discrimination, equal approach to values | |Creditors |Payments in time, safety of investments | |Municipality |Employment, taxes | Table 1-1 Involved persons and their expectations 1. 4 Key terms Owners strategy Managerial strategy Marketing strategy Sales strategy Human resources strategy Production strategy Sales plan Marketing plan Financial plan Production plan Human resources plan Industrial market Consumer market Stakeholders Shareholders Customers Consumers SME / Small and medium enterprise 1. 5 Test questions 1. What objectives definitely belong to the owners strategy? ) achievement of the defined turnover b) achievement of higher market share c) achievement of the objectives defined in quality policy d) achievement of the defined ROE 2. What has to precede the financial plan unconditionally? a) quality management plan b) marketing r esearch c) human resources management plan d) logistic management plan 3. Who pursues the market requirements within an organization? a) production director b) sales and marketing director c) financial director d) technical director 4. B2B means to trade in: a) industrial markets b) commercial – consumer markets c) the area of employees' purchases d) the field of state contracts 1. 6 Recommended literatureHavlicek, K: Management, Role of Managers in Company Management, chapter 1 Hellriegel, D. – Jackson, E. S. – Slocum,J. W. (2005) : Management , A Comepetency-Based Approach. Thomson South-Western, Mason, chapters 1, 5, 6, 7. 2. Role of management within marketing management 2. 1 Marketing management 2. 2 Marketing policy 2. 3 Marketing researches 2. 4 Marketing planning 2. 5 Key terms 2. 6 Test questions 2. 7 Recommended literature 2. 1 Marketing management Marketing management is an essential business activity, without which no company can do, even more so if it has an ambition to export its own products, and to conquer new territories.Marketing management in CRM mode is defined as continuous process of analysis, planning, implementation and control of all the company's activities. (Source: Kotler, P. , Armstrong, G. : Marketing. Grada Publishing, Praha 2004). The goal of marketing management in a company is to satisfy business objectives of the entity or entrepreneur by satisfying the customers' requirements. K. Havlicek and M. Kasik in their publication Marketing management in small and medium enterprises (Management Press, Praha, 2005 ) created practical model of marketing management (Figure 2-1) when applying the philosophy of managed relations with customers: 2. 2. Marketing policy Each enterprise should have its marketing policy defined by the marketing director.This is a simple document that describes basic philosophy of the department, including product portfolio, customer segments, proposal of corresponding distribution, communi cation, and human resources. It should be linked to the overall strategy. The purpose of marketing policy is to provide simplified map of the main line of work of the department, what are the current customer segments, what marketing and sales activities are being prepared in the horizon of one year, who implements the current activities, how is the evaluation organized. The policy is prepared once a year, it should be in the form of a document given to every employee of the marketing and sales department, and to the company director. Marketing policy document usually includes: Organizational design of the marketing and sales department.Simple graphic chart of the organizational design is enough, where marketing director is on the top (in smaller companies marketing and sales director), followed by other team members, managers, sales representatives for domestic or foreign markets (so-called front office), sales assistants, background personnel (so-called back office), etc. Everythi ng depends on the orientation, size, and organizational design of the enterprise. It is important to highlight the relations between possible subdivisions and hierarchy, i. e. who report to whom, who is responsible for whom. It is quite easy in smaller enterprise, but tens of staff members in the marketing and sales department are not an exception, of which some are field sales people, others work in branch offices or abroad. In such a case the organizational design is very important – from both control and transparency point of view.Main product groups and territorial division of the customers This means the overall product and territorial division, and major customer segments. The product division does not have to be detailed (individual products), but it should correspond to the group structure according to sales plan, maximum ten basic product groups (depending on the scope and orientation of the products). Territorial design means the division to individual countries, or regions. Customer segments should also be divided to maximum ten categories. It should be clear who is the customer, and what product mix will we offer. It is important to include concrete personal responsibility for all the above mentioned categories in the marketing and trade policy document.Human resources status and activities Complete list of all the department's employees, their job assignments, classification within the organizational design of the team or projects of marketing and sales character, or projects of another departments and sections. It is useful to include e-mail addresses, mobile and fixed phones in the list. The fact that such document can be a major communication tool for some staff of the marketing and sales department should be taken into account. Motivation system The motivation system represents team motivation, system of evaluation aimed at departments, groups, or projects, concrete motivation instruments leading to the best performance of the staff, an d consequently to prosperity. In other words – the system of remuneration should be clear from this document, i. e. nder what conditions, when and for what, in what way and by whom the remuneration will be approved and provided. Summary of individual evaluations, or even individual incomes should definitely not make part of this public document. Communication within the department When and where regular meetings take place, in what intervals, who takes part, what source materials are required, where the minutes are archived etc. The dates of â€Å"brainstorming† meetings, workshops, project sessions, innovation committees etc. can be provided as well. Marketing department directives In case there are directives of any kind used in the department, they should be included to the marketing policy as well.These can be for example directives related to quality policy, or internal directives of the department, such as a directive on the management and administration of trade receivables. 2. 3 Marketing researches For both large companies and small and medium enterprises the continuous market research is a cornerstone of their activities. It should not relate only to a particular goal or immediate plan; its ongoing implementation and monitoring are advisable. Product life cycle gets naturally shorter in the era of growing competition. Endless flow of information on new trends, competition, groups of customers and suppliers are key of further company development.The objective of marketing research is systematic planning, collection, analysis and evaluation of the information needed for an effective solution of marketing problems. This applies to all types of organizations in general. In small and medium enterprises the research is adequate to their possibilities, but even here it is necessary to understand that sound research is a basis for other activities. This implies the necessity of system approach, i. e. to apply the research of external environmen t aimed at the following aspects (so-called STEEP analysis): – sociological, – technological, – economic, – environmental, – political. This research is crucial, namely in the case of more remote territories, market environment of which is not well known.When researching the internal competitive environment it is convenient to use factor environment analysis (so-called Porter's model of competitive environment): – number and strength of competitors, – customers, – suppliers, – substitute products, – potential competition. It depends on the purpose, type of business, size of the competitive environment, market share, power of the organization etc. The research includes collection, processing and analysis of the information, and a report has to be prepared, and maybe its results presented. To cover the information needs plan of the research can require collection of secondary data, primary data or both. The secondar y data includes information that has been already collected for a different purpose. On the contrary the primary data is collected for a specific purpose.In the first case the enterprise makes use of its databases, and open external sources (public electronic databases, associations, chambers, media etc. ). In the second case ordinary accounting and economic data from the database of deals and customers will be the source, including minutes from meetings. However, it is good to realize that the market research does not mean just some spreadsheet and statistic methods, tens of pages of various papers, and expensive agencies providing professional surveys. The very research can be simplified in the small and medium enterprises under the slogan: â€Å"Collect and use the information from the market and its surroundings†, and it is up to the managers' abilities to get the information on continuous basis.It means to keep communicating with the customer, to listen, to ask for feedb ack. It should be a precondition for the managers conducting marketing research to improve their education in this field further, to travel and learn new methods, to extend their general overview. To clinch a good deal is often not a matter of high expertise, but of general overview of politics, culture, sports, history, religion etc. Marketing department personnel should be able to absorb various kinds of information, and use and implement it further. General overview and fast work with information, as well as the ability to recognize their importance, are key criteria of recruitment of people for marketing and sales posts.Apart from the marketing research being performed on continuous basis, and the important data being archived, we obviously organize targeted research, depending on the upcoming events, which can be in the small and medium enterprises for example: – business or investment goal, – opening foreign market, – launching new product groups in the ma rket, – establishing communication with a new customer segment, – expansion of resent production – increase of production capacity. It is also recommendable to update the marketing research on regular basis, when preparing annual sales and marketing plan. As a comprehensive document it should include an opening page and provide reasons why it has been conducted, information on the date and person, or contact to cooperating agency. Sales and marketing directors should be in charge of all the researches, not just relying on heir subordinates to do the work.The activities relate to significant, often sensitive data, which may be possibly carried away to a new employment. Successors usually start working on these data, which often represents the only document that provides characteristics of the product, customer segment and particular customers. At the level of small and medium enterprises it is useful when such research is performed by individual experts supervise d by their manager, or directly by the marketing and sales director. This means the sales people who will be directly responsible for the researched segment or territory. Sales and marketing departments in SMEs usually do not dispose of a team of market research specialists, which is rather advantage.The research can be very well evaluated by the commercial success or failure of the responsible sales person, in comparably short time. However, this required good skills of the sales people. Apart from usual business skills and sales psychology training these people (often sales representatives) should be regularly trained in the basis of marketing in order to understand mutual connections of marketing, trade and communication. Marketing research is a necessary source document for the marketing and sales plan. 2. 4 Marketing planning Marketing plan belongs to basic pillars and documents needed for a successful management of the whole enterprise.Within SMEs, where we discern sales and m arketing management, the sales plan is often part of the marketing plan, called marketing and sales plan. The sales and marketing parts of the plan are still independent, mutually connected documents, use of which can be: – (A) Annual, as a fundamental document for the management of marketing and sales department. – (B) Individual, as one of the basic documents for various activities and fields, for example: – business or investment goals, – opening of new foreign markets, – launching activities in new regional territories, – launching of new products in the market, – restructuring of enterprises.Marketing plan comes before financial plan, production plan, and human resources plan. Marketing plan is developed by the whole sales and marketing team, finalized by the marketing and sales director, who submits it to the enterprise's director and bears responsibility. Marketing plan has to comply with the selected sales and marketing policy , and to be based on the whole company's strategy. Within the time sequence of individual plans it is always on the first place, i. e. being developed in September – October of previous year. It is linked to marketing research, good quality of which is fundamental for the success or failure of the marketing and sales plan. The marketing plan (Figure 2-2) includes: SWOT analysis of the enterprise, – department (whole company) objectives, – strategy of achievement, – control mechanism of (assessment) achievement. Figure 2-2 Process of creation of marketing plan SWOT analysis To evaluate the result of enterprise's or its department's activities the frequently used and well-known analysis of strengths, weaknesses, opportunities and threats – SWOT is used. The strengths are compared with opportunities (creative thinking), and the weaknesses with threats and potential risk (basis for risk analysis). SWOT analysis in general is considered to be a very imp ortant strategic tool, which exceeds the framework of marketing.It provides information from the viewpoint of customer relationship management on what works (and what doesn't work), and on the changes in the interface between us and our customers. It is obvious we usually prepare SWOT analysis on the basis of previous research of external and competitive environment. The basis for SWOT analysis has to be thorough prior marketing research, otherwise we will not be able to compare our strengths and weaknesses, neither to define the opportunities and threats. Another danger of SWOT analysis is frequently a long list of wishes and limitations that remain the same for years. That is why it is important to focus on areas we can manage and influence.We use SWOT analysis not only as a necessary part of marketing plans, but also when evaluating personnel, annual reports and the like. Every salesperson and marketing staff member shall know the SWOT analysis and be able to make use of it withi n trading negotiations. The point s not to make too detailed analyses, 3 – 6 apt facts are enough for each area, expressed in the form of easily remembered slogans. The purpose of marketing plan should be considered. In case it is a regular document (see A) annually prepared for the company management, it is a description of status, opportunities and threats of the marketing and sales department, or the whole enterprise (in smaller companies).In case of plans prepared for certain event (see B) the SWOT analysis relates to one activity only, it is a partial or professional SWOT analysis, which is used for the decision on how and whether to perform the activity. SWOT analysis should be brief (three to five points to every issue), communicated to the whole sales team, which should possibly participate in its preparation. It is not just a basis for next decisions in the sense of feasibility of the set objectives and consequent method of their achievement, but also a good basis fo r negotiations of sales people with partners. Knowledge of the weaknesses and strengths, opportunities and threats of the enterprise due to its environment should be a matter of course for the whole company management.Strengths generate opportunities, some of which may even become objectives, on the contrary the weaknesses can lead to threats come true, and represent a basis for risk analysis. As well as the whole marketing plan the SWOT analysis should be created by team, while the final version and expressions are task for marketing and sales director. The very form of SWOT analysis within marketing plan can be one page, graphically clear matrix. Following the SWOT analysis we define the export department's or company's objectives. To systemize these factors a simple form is used (Table 2-1). SWOT analysis of a food processing company is provided as an example. | | |COMPANY STRENGTHS: |OPPORTUNITIES IN THE MARKET: | |– team of specialists in the company's |– new cus tomers recruited among chain | |management |stores | |excellent safe input material |– new product range – finished | |– well established network of supplied |food for the existing customers | |entities |– CR in EU – new customers | |– modern technological background | | |– wide assortment of products | | | | | | | | |COMPANY WEAKNESSES: |THREATS FROM THE MARKET: | |– language barriers |– strong competition in the market of | |– communication within the company, and |foodstuff suppliers | |towards external customers |– foreign competition | |– no product certified as â€Å"TOP product† |due to Czech Republic in EU | |– efficient approach to sales promotion |– orientation of multinational chains to | |missing |the products of their home countries | Table 2-1 Example of SWOT analysis of a food processing company Marketing objectives When defining the objectives we again di fferentiate between the plan as a managerial document (see A), or a plan of implementation of particular project (see B). In both cases the objectives should comply with several parameters, initials of which gave the method of their setting its name – SMART. They should be: – Specific (repeatability), – Measurable (turnover, margin, customers numbers), Achievable (in accordance with the enterprise's objectives), – Realistic (possibilities of the enterprise, market capacity), – Time (realistic delivery terms, possible to control). The objectives are based on SWOT analysis, i. e. on actual possibilities and opportunities of the enterprise. It should not be difficult to set objectives using SMART method, provided the marketing research was performed well, or carefully updated. It is definitely not correct to go deliberately for high targets with the idea they do not have to be really achieved, but still we will have some good results. The proverb â₠¬Å"if you want to go high, you have to aim even higher† does not apply here.It is recommendable to â€Å"stand on the ground† and create safe buffer, while keeping necessary and expected efficiency. It is because motivation plan is linked to the objectives, which would otherwise not make sense – unreal objectives would be rather de-motivating. It is not exceptional that the motivation plan is not related to the achievement, but exceeding the target, which once again confirms the need to set the objectives in a realistic manner. In the first case (A) we set the objectives for one year ahead, maximum of ten easy to remember and measurable objectives are recommended. Considering joint sales / marketing plan, its first objective should be to fulfill the sales (commercial) plan.Other objectives can come from a wide range of marketing activities, depending on the company's focus, financial possibilities and realistic ambitions in the upcoming year. In the second case ( B) fewer objectives are recommended (maximum five). Here the objectives logically relate to a project to be implemented. As one of the first objectives it is advised to set the fulfillment of sales plan for specific project or territory, to which the whole plan refers. Other objectives can be for example aimed at winning certain number of customers, penetrating specific territories, organization of foreign trade fairs, implementation of particular reference deal, launch of a new product etc.It is not the most convenient in small and medium enterprises to set objectives related to achieved percentage of market share, for example to increase the share by x%, because the market share of small entities is hard to measure, and there is not necessarily a possibility of credible verification of its achievement, and the motivation for these objectives is not easy either, as it is not an exception to obtain quite different data on our market share. Specific marketing objectives in individual markets can be expressed as: – given desirable volume of sales, – financial indicators – achieved profit, return on investment, – customers relationship – increase of spontaneous awareness of the brand within the target group, increase of customers' loyalty.The objectives should fulfill the above mentioned SMART criteria, they have to comply with main company goals, and geographically outlined. Organization of active marketing is quite costly even in domestic markets, and definitely more in foreign markets. Therefore it is necessary to set the amount of anticipated income and revenue for the planned period. The work on formulation of department's or company's objectives should be a task for the whole sales and marketing team. Every participant should be able to complete and substantiate own sales plan, depending on the knowledge, market research, last years' results, skills and experience, and factual data, and provide adequate reasons.This is ano ther reason why a specialist shall perform the marketing research, which consequently addresses the specified segment, or implements the selected product in the territory. The form of objectives: – it is sufficient to describe the chosen objectives in pregnant terms (one page document), – it is necessary to mention who is responsible for the achievement (name, position), – deadline has to be provided with each objective (specific date). Strategy of achievement of objectives The strategy of achievement of the set objectives describes how we shall implement them. In a sense it is a small business plan, â€Å"timetable† of HOW we want to achieve the set objectives.It is the most important part of marketing activity in the company, where creative, analytical and theoretical skills have to be combined, as the method of execution of the set task has its own system and order. When planning the strategy of achievement of objectives it is necessary to select the p rocedure that not only complies with the character of our business, but also covers the whole marketing area. It is convenient to use 4P or 4C marketing mix. Every step we are going to implement has to be compared back to the company's possibilities in financial, marketing, personnel, and production sense; sometimes the compliance with quality policy is verified.That is why the team work with financial manager (or quality manager)is good for development of the strategy, it is proper to involve production managers who should create feedback to production and capacity conditions, and give the sales and marketing strategy adequate direction. This process is not in conflict with the previous principle of pressure on production and preferential position of marketing in the sense of product decision making. In case of a dispute the production shall not have veto right, as this should be the power of company's director to decide on further procedure, based on the views from marketing and s ales, finance and production.However, this does not mean that the salespeople will not consult the strategy with financial and production managers. It is considered ideal situation, when there are variants emerging during discussions, acceptable for all parties. One should always be aware of the human resources opportunities of the department, which does not relate strictly to financial matters. Even if we have sufficient resources in budget to pay new salespeople, we do not necessarily find them in the market, and we may thus sacrifice the objectives. Following the above-mentioned, the qualification of sales and marketing staff should not be limited to expertise and general knowledge, they should be able to provide sound arguments and negotiate within internal discussions as well.For this purpose they have to know the company's environment, capacities and possibilities. Major advantage is their basic knowledge of financial terms, which means at least the ability to read the budget, and defend their sales and marketing procedures properly. Figure 2-3 illustrates possible process of defining the strategies of achievement of objectives. This can obviously vary depending on the focus, size and goals of the enterprise. Figure 2-3 Possible process of defining the strategies of achievement of objectives 2. 5 Key terms Marketing management Marketing policy Marketing director Qualitative marketing research Quantitative marketing research Marketing planning Far environment Near environmentInternal environment Product group Product range Pricing policy Pricing strategy Distribution strategy Marketing targets Communication mix Customer segment 2. 6 Test questions 1. SWOT analysis is a basis for: a) marketing research b) managerial plans (sales, marketing, financial) c) establishment of company information system d) company's annual report 2. Enterprise can't control in any significant way the factors defined in: a) STEEP analysis b) SWOT analysis c) Porter's analysis d) customers analysis 3. Questionnaire survey is a part of: a) quantitative marketing research b) qualitative marketing research c) risk analysis d) analysis of strengths 4. CRM is: ) the highest level of marketing management b) database file c) information system d) credit customer system 2. 7 Recommended literature : Havlicek, K : Management, Role of Managers in Company Management, chapter 2. Hellriegel, D. – Jackson, E. S. – Slocum,J. W. (2005) : Management , A Comepetency-Based Approach. Thomson South-Western, Mason, chapters 3, 5, 16 3. Role of management within sales management 3. 1 Sales management 3. 2 Management and development of sales plans 3. 3 Management of forecasts 3. 4 Trade receivables management 3. 5. Customers communication management 3. 6 Key terms 3. 7 Test questions 3. 8 Recommended literature 3. 1 Sales managementSales management is linked to the marketing strategy, in many respects complementing the marketing management. It is often quite difficult in SMEs to tell the boundary between marketing and sales management. In any case, it is not possible to simplify the very sales activities only to the purchase – sales level. For example the management of forecasts and receivables belongs to major managerial activities that exceed the borders of sales significantly, being of crucial importance for the company. Karel Havlicek in his publication Marketing management of foreign trade (Eupress, 2006) summed up the basic aspects of sales management to the following four areas ( Figure 3-1 ) : 3. Management and development of sales plans The sales plan is an essential document for the sales department; in smaller companies, where there are mostly joint sales / marketing departments, it is also a part of marketing plan. That is why it is convenient to incorporate the objectives of sales plan in the objectives of marketing department. This fact of rather technical character does not change a word said about the sales plan being cruc ial for the budget, strategic document that has to comply with certain requirements. Some enterprises, mainly the smaller ones, often ignore the marketing plan, and use only sales plan for commercial management.From short-term viewpoint this is possible, but it can't be effective in a long run, as the enterprise is going to lose contact with market reality sooner or later. Such plan is then more or less routinely re-written every year, some per cent added or subtracted here and there according to the current view of sales people. Innovation impulses are missing, as well as new trends and feedback, the control over competition is lost, communication with customers chaotic, distribution without concept, and prices frequently at random, i. e. according to what the customer asks, regardless of the overall market and company situation, not to speak about the prolongation of development trends.In these circumstances the staff can be hardly motivated, and the discussions concerning sales p lan figures are difficult. Sales people are not continuously forced to collect new information (which they may like at times), and they lose so important arguments for business negotiations, they have problems describing major competitive advantage of the company, and they face difficulties when defending it against competing offers. It is up to the personality of marketing and sales director and general director to be consistent when requiring the preparation of marketing and sales plans, be it very simple documents of few pages. Absence of such policy is mostly due to the fact that company directors don't know how to apply it.This â€Å"lack of knowledge† is being argued: â€Å"we have never needed that, we have read the market for a long time, everything has worked fine so far, you are making up useless things†¦Ã¢â‚¬  etc. It is one of serious mistakes and managerial faults to be rigorously eliminated. In case the sales plan makes part of annual budget it should be developed for one year ahead (submitted in October the previous year), divided in months and quarters. In case of export activities it is correct for every conquered territory to have its own sales plan, even very simple one. This brings the possibility of easy monitoring of every market by assigning overhead and personnel cost to each territory, and working actively with the price map. Complete sales plan is then total of all the territories, or other monitored groups.Overall sales plan for foreign markets is usually divided by: – product groups (sometimes we talk about commodities, or product lines), – customer segments or specific major customers (in mix by the product groups and territories), – territories (every foreign territory separately, individual regions can be sub-groups), Detailed sales plan can include other sub-categories, as well as some plans can ignore certain above mentioned points of interest. It is definitely useful to divide the plan at lea st in two categories, and cross-compare the results and forecasts (see below). This is good for the management of forecasts, and this way we compel the sales people to think about the plan and the prognoses. Sometimes the plan is complemented with â€Å"by sales people† or other category. is logical that the end and total monthly figures have to be equal in the individual categories. From these data we can tell immediately where a major difference occurs, and what should be our focus. For example – if we plan smoothly by product groups, but there are problems with planning and formulation of expectations by customer groups, it means we have a good overall picture of the market, but the work with individual groups of customers and relevant prognosis is difficult. In other words the communication between us and the customer is not exactly perfect one, which can lead to losing them over time. This means we need to respond and look for a remedial measure.Another important aspect of the division is the immediate overview of individual market segments, as we can measure their trends and performance in these segments, and following the data we can develop further marketing activities. These obviously vary depending on the groups and segments, often in all the marketing mix aspects. Sales plan indicators Major indicators of sales plan are turnover, sales, or own output. This indicator is always provided in one measurable currency – CZK, EUR or other. The data regarding measuring units can be also included in the sales plan; they are significant, but not crucial. It can be a major mistake, when some companies use as their main sales plan indicator such measuring units as number of pieces sold, square meters, tons etc.The control gets more complicated, as measuring unit can change its price in a short time, but most importantly – we can't measure immediate efficiency. The fact that more tons are sold does not mean increasing turnover or outpu t. Sometimes other indicators are measured, such as margin, but once again – it should be measured as a sub-category, and evaluated on continuous basis. This indicator is important namely for trading companies, where the turnover may grow and plan be achieved, but at the expense of lower margin, which can influence the whole company's economy at certain stage. It is necessary to adopt strategic measures in time. How to develop a sales plan? When compiling a sales plan, we most often utilize mixture of the following primary and secondary methods:Data from previous periods This is the most simple and available method, by which we track our sales results in given product groups, territories and customer segments in previous periods. In case we have been in the market for a longer time, we follow trends in specific categories, overall turnover figures, the margin and seasonal trends. Such information is definitely important for the development of plans, but not crucial. The preco ndition here is we've already made business in the territory. Market research from the viewpoint of competitive and external environment The basis is continuous or specific research of a foreign market, which is described in previous chapters.Apart from other data we are interested in the sales of our competition, trends and purchasing behavior of our customers, price policy of our suppliers, the threat of substitute products, capacity of foreign markets etc. In more remote territories we would track sociological, technological, economic, environmental, or political factors. The market information collected during marketing research of external and competitive environment is usually the most important basis for correct estimation of revenues. Professional intuition, experience and market estimates This is rather complementary method of estimation of revenues, which is nevertheless very valuable. Only the experienced sales staff can afford this, capable to foresee the behavior of con sumers in selected markets.Foreign traders who operate in foreign territories on our behalf, and know the purchasing behavior of local population very well, can serve as an example. These experienced managers are priceless, but even here we need to think of their estimates and intuition, prognoses and forecasts as a complementary factor for plan development. Form, reporting and approval of the sales plan The sales plan has to be well arranged with regards to given period – usually prepared for individual months. The best would be to fit it within one page for the sake of good orientation. Budget, forecast (see below) and reality columns should be included. Differences have to be regularly monitored and evaluated. The sales plans of individual sales persons should be regularly (usually once a week) reported (e. g. lectronically via the company's information system) to the marketing and sales director, and made part of regular meetings of the marketing and sales department, or export department. Total annual sales plan is a work f the whole export team, marketing and sales director is responsible for its completion on the basis of individual plans. Individual sales persons are responsible for their partial sales plans. It is the task for marketing and sales director to evaluate each individual plan objectively, to provide a healthy opponency and cooperate on the final figure, which can be either the revenue, turnover, or margin. The sales persons bear absolute responsibility, and their motivation aspects are derived from the plan.It is recommended to set motivation bonuses for exceeding the plan, as the financial budget should be built on basic salary and fulfillment of the sales plan, or achievement of economic result. This means bonus shall be paid on the basis of exceeding the plan in certain ratio determined by the company's management, with a reserve for marketing and sales directors (following the logic: exceeding the sales plan = exceeding the tota l economic result). 3. 3. Management of forecasts The importance of management of forecasts is bigger than generally perceived, and it goes far beyond the framework of marketing and sales department. The term â€Å"forecast† is used in foreign companies in the meaning of â€Å"estimate†. Other used terms are â€Å"sales prognosis†, or â€Å"expectancy†.Foreign companies have learned to use the forecasts as an essential managerial act – basis for the whole company's strategy . There is some lack of willingness of sales persons and managers regarding forecasts in our country. It is a strategic mistake, which should be avoided by marketing and sales directors. This insufficient willingness is more or less due to the fact that the sales people don't know how to prepare the forecasts, or how to estimate the purchasing behavior of their customers, and sales of their products in the horizon of few upcoming months. But first let's have a look at the sequen ce and importance of the management of forecasts.Sales person submits and substantiates the following data within the sales plan development: a) sales plan – usually one year ahead, by months (territories, segments or product groups), b) continuous forecasts – always several months ahead, prepared every month (tracking the differences between the plan and forecasts), c) reality – i. e. actual result by months (tracking how the reality differs from budget and continuous forecasts). Importance of the management of forecasts We prepare the forecasts usually every month, always for 3-6 months ahead, i. e. in January for Jan-Jun period (six-month prognosis), in April for Apr-Sep period, in November for Nov-Apr period (in this case we overlap in two sales plans – of the current and following year), etc.We see the importance of management of forecasts in the following aspects: 1. We monitor the differences from budget sales plan By continuous monitoring of the t rends and preparing prognoses (e. g. sic months ahead) we track the differences between actual and budget figures, i. e. the effects on budget economic result. There are basically three options: – Continuous forecasts do not vary from the budget – it means we have prepared the budget very precisely, there will be likely no effects on the economic result. – Forecasts are higher than the budget – it means our revenues will be probably higher than the budget expects, which may leads to many positive effects, but possible negatives should be considered.These can include higher receivables due to larger volume of sales, and consequently possible need to supply external resources to cover operating capital, which is not necessarily a matter of short time (guarantees). Moreover, the overdue receivables may grow, which is another complication when supplying external bank resources. However, there can be a reverse effect, i. e. cash surplus, which is obviously a p ositive. Even in such a case it s good to know in advance, as we can cancel loans, change funding or develop another investment project, where the resources can be used. This is a matter of several months, therefore continuous information on higher forecasts in the horizon of months is very important for us. Continuous forecasts are lower than the budget – undoubtedly negative message, in such situation the economic result is at stake, sometimes even general company's existence. Here the timely indication in the form of six-month advance is twice as important, as it is necessary to adopt immediate measures. These may include an application for external resources, which is a matter of several weeks, or even months in banks. These may also be considerable cost cuts, such as layoffs, which is once again a matter of months (considering the compensations and notice periods). 2. We force the sales people to collect market information and communicate with customersThis is another ve ry significant aspect of both marketing and psychological importance. It requires prognoses in six-month advance (there are companies, namely multinationals, which require even annual forecasts with monthly breakdown). This means the sales people have to collect new, updated information on regular basis, i. e. to work with the market. On

Ateneo Entrance Exam Essay

Hazel Grace Lancaster (The Fault in Our Stars by John Green) This little line from one of my favorite books helped me start my journey of self-discovery. Before, I really did consider myself as someone very inexorability. To the world, I'm Just an average girl that nobody will ever notice. Maybe never will be noticed in an extraordinary way, but I'm determined to make my mark. But flirt things first, I had to discover myself and define who I really am. My first moment of self-discovery began, actually, when first developed my love for books.And that moment happened way, way back when I was still a young child. Nothing made me happier than going to National, Power Books or Fully Booked to go see what new storybook, magazine or novel was available. To this day going book shopping, an activity most people my age would find as agonizingly boring, is an opportunity to expand my knowledge and vocabulary. The only thing I need to improve on right now Is, admittedly, my book choices. My Dad constantly reminds me to move onto more young adult publications and cut back on the children's novels. Books are my flirt great love.Through them, I can go on fantastic adventures that become almost real in my imagination. I also relate to the characters In terms of their personalities and the things they do In the story. From the protagonist, antagonist and all the other characters in between, I can find someone or even something I can relate to in a book. My current favorite books are The Fault in Our Stars by John Green, where I have learned a great many deal of new words such as hamster, thyroidal, prototypical, narcissistic, bacchanalia and so many other terms that were once too sophisticated or me to understand until I looked them up In the dictionary.The Fault In our stars is a heartwarming and yet also heartbreaking love story of two young cancer-stricken teenagers who find their own little infinity together within their limited number of days. I'd tell you more but I would n't want to spoil the entire novel. Second in my favorites list would have to be The Book Thief by Markus Sake. Here, I saw World War II and the horrors of the Holocaust through a young girl like myself, who was unable to read and write until she was given to a foster family in Germany. Lies Impinge then later befriends Max Vandenberg, a Jewish man who hides in her family basement to escape the Nazis.Again, I will not spoil this great work and you will have to read it yourself. This book really strikes me as something that can really make us all question our humanity. As almost all of us know, the Holocaust in World War II was the most horrifying genocide in the entire world. Millions of men, women and children all executed Just because of their religion. If you ask me, Doll Hitler must have been both insane and blind. Did he not know that in World War l, approximately 96,000 Jewish soldiers fought for Germany? It pains me to think that Hitler did not remember that.The Book Thief is most definitely one of those war novels that will have you questioning mankind's humanity. As for a favorite book series, I would have to say that the How to Train Your Dragon series by British author Caressed Jewell. I admit, it's a children's books series but I really enjoy reading the 1 OFF imagination. In fact, this beloved series has been turned into two films and a TV show. But I'll tell you all about it later. Indeed, through reading books of all kinds I eave discovered things about myself I didn't even know were there. I discovered that I have a talent for writing and storytelling.And I have grown to love these two hobbies, which I hope that I can turn into a Job by becoming a writer or a Journalist when I grow up. Aside from reading, I have also experienced being in academic contests in my school where I have begun to define myself as an intellectual. One of those contests is the Essay Writing Contest the school has every year. I never really win any prizes for my composit ions but it's always so much fun to compete. Through essay writing contests, my writing ability is steadily honed and constantly improved with every essay I write.So part of my Journey of self-discovery has been accomplished through the means of books and writing. The other part is, honestly, what Vive been recently obsessing about. â€Å"Everything we know about you guys†¦ Is wrong! † – Hiccup Horrendous Haddock Ill (How to Train Your Dragon Movie) That line from an animated movie by Trademarks Animation has always been embedded in my memory. The first part of this essay focused on my love for books and how reading and writing eave helped me discover who I am in terms of what I can do in this world. This part will now focus on who I truly am as a person.How to Train Your Dragon is a 2010 animated film directed by Dean Edibles and Chris Sanders under Trademarks Animation. Its story revolves around a young Viking teenager named Hiccup (Yeah, I know. The name is pre tty unusual. ) who lives in the fictional dragon fighting island of Beer. In Beer, fighting dragons is as necessary as breathing air to live. However, Hiccup is the runt of the village and is physically unable to fight dragons and cannot vive up to his father's expectations. Incidentally, his father, Stoics the Vast, is the tribe chief.But when Hiccup creates an invention that shoots down an ultra rare dragon species known as the Night Fury and attempts to slay it, the young Viking then finds himself unable to do so. This then leads to him freeing it and establishing a forbidden friendship with the dragon, whom he names Toothless. In Hiccup world, befriending a dragon is the highest act of treason. And yet in the end, Hiccup and Toothless' amazingly strong bond enables them to change the relationship between he dragons and Vikings of Beer. Yes, it is an animated movie. But it is not strictly for kids only.I had a real moment of self-discovery and self-definition when I watched this at my best friend's recommendation. And I was immediately awestruck by the movie on so many levels. The detail on the animation was superb, the lighting was perfect, the music score was Just phenomenally beautiful. But what really touched my heart was the story. I really relate to Hiccup. He is left-handed, physically not in the best of shape, intelligent and extremely different from the rest of his peers. L, myself, am also left- ended, physically weak, mentally strong and†¦ Different.I often look at my friends and other people and I can't help but sometimes feel that I'm Just too different. I don't like all the things everyone else likes and sometimes I don't even understand current trends and stick to the things I know. Like Hiccup, I am different. And also like Hiccup, I have embraced my difference. Thanks to this film (and its TV series and sequel) I have figured out who I am as a person. Everyone discovers a new trend and they all zone. And when someone tries to change me , I steadfastly refuse to do so. I am an individual. And I am proud of it.I'm different from everyone else and that's okay. Truth be told, we're all different. We're Just scared to show the world our individualistic. That's why I try hard to stay true to myself and make sure nobody and nothing turns me into something I am not. But I also remind myself to keep an open mind and broaden my horizons. When I experience new things, it helps me discover more interesting characteristics that help define myself as a person. And that's exactly what Hiccup does. He accepts his individuality and tries to do things nobody has ever tried before.Throughout the film, TV series and sequel, Hiccup stayed true to himself and didn't allow anyone to change him. If you must know, I have recently watched How to Train Your Dragon 2 and had another great moment of realization. In the second film, Hiccup is now a young adult and is currently trying to find himself. This is exactly what I'm doing right now, e ven as I write this. I apologize if this essay may seem haphazardly constructed. I must admit, my writing style does tend to confuse some people. But that's essentially how I have defined myself as a person, through books, writing and argons.And to tell you the truth, self-discovery and defining yourself as a person never stops. As the years go by, you will have more experiences, more moments that help you realize that there's more to you than meets the eye. For me, I'm still pretty young so I still have a long way to go until I can complete my personal definition. In case some of you may not fully know me yet, allow me to tell you once again who I am. I am an individual with a love for writing, making stories, reading books, obsessed with dragons. And basically, I am different. And I am proud to be different.